Property Plus
Coimbatore
Tax-free zones for affordable housing
Meeting the challenge: The demand for affordable housing will increase phenomenally.
The creation of Special Residential Zones (SRZs) has been mooted as a possible solution to meeting the rising demand for affordable mass housing in the country.The concept, mooted by Kumar Gera, chairman of Confederation of Real Estate Developers’ Associations of India, involves the creation of special tax-free zones where only mass housing of a certain kind will be permitted.
“A Special Residential Zone (SRZ) is a notified geographical region that is free of domestic taxes, levies and duties (both for the creation, operation and maintenance of the SRZ) with special development rules to promote large-scale, greenfield, affordable housing projects for the country’s masses. The SRZ would have a prescribed minimum number of dwelling units with a maximum prescribed size, and each SRZ would require adequate social infrastructure, including schools, medical facilities, etc.,” is how he describes it in a recent concept paper.
The National Housing and Habitat Policy, 2007 has referred to the need to develop new integrated townships as half of India’s population will be living in urban areas by 2041. Concepts such as the SRZs will have to be promoted to help the country meet the massive upsurge in housing demand, he says.
But with the takeover of land for the Special Economic Zones becoming a contentious issue in some parts of the country, will the creation of any kind of a zone involving land acquisition prove viable?
No land acquisition
Mr. Gera is very clear that the creation of residential zones should not involve land acquisition by the government. “This proposal does not suggest any acquisition effort by the government — all the land should be purchased by the developer at fair market values, without any government intervention in the acquisition process,” he told The Hindu-PropertyPlus.
“It should just be a transaction between a willing buyer and a willing seller without any compulsion, force, or threat of an acquisition law supported by a State or local authority. Under no circumstances should there be any compulsion for an unwilling seller to be forced to surrender his land,” he further explained in response to a question as to how his SRZ proposal could be implemented in a densely populated State such as Kerala.
Taxes that are prohibitive act as a “significant barrier” to the development of large-scale housing projects for the cost-conscious urban mass market, he argues.
As on December-end 2007, the pan India average rate (per sq.ft) for a residential apartment is around Rs. 2,700, of which Rs. 700 per sq.ft ( little over 25 per cent) can be directly attributed to various local, State and Central duties and levies and direct and indirect taxes in the form of value-added tax, service tax, tax deduction at source, stamp duty on sale, stamp duty on land, income tax on profit of development, materials, services, municipal premiums and development charges, excise on materials, Octroi and other levies.
So, there is a need to create an economic vehicle that will help the country meet the demand for good quality affordable housing arising from rapid urbanisation and the SRZ concept will be the answer to it.
T. RAMACHANDRAN
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