Tax and non-tax incentives to promote urban infrastructure

hunNEW DELHI: In order to meet the demands of better urban living, government has offered tax and non-tax incentives to promote investments in urban infrastructure and housing sectors besides increasing Plan outlay in the Budget 2014-15.

Urban Development and Housing Minister Venkaiah Naidu has directed senior officials of the two ministries to initiate action immediately for operationalizing new initiatives after the presentation of the budget.

Acknowledging the importance of urban development and urban renewal to meet growing aspirations of the people for better urban living, the government has increased Plan Outlay for urban related projects by 251.44 per cent in the budget.

The Plan outlay, which was Rs 6,561.34 cr in the Revised Estimate for 2013-14, has been hiked to Rs 16,497 cr for the current financial year.

Noting that “a neo-middle class is emerging which has aspiration of better living standards”, the government has provided Rs 7,060 cr for realizing Prime Minister Narendra Modi’s vision of developing one hundred Smart Cities.

According to a senior Urban Development Ministry official, the cities will be developed as satellite towns of large cities and by modernizing the existing mid-sized cities.

He said Smart Cities will accommodate the burgeoning number of people without which the existing cities would soon become unviable.

In order to encourage development of Smart Cities, requirement of the built up area for Foreign Direct Investment (FDI) has been reduced from 50,000 square meters to 20,000 sq meters and capital requirement from USD 10 million to USD 5 million.

To further encourage this activity, such projects committing at least 30 per cent of the total project cost for low cost affordable housing will be exempted from minimum built up area and capitalization requirements, with the condition of a three year lock-in.

Assistance to the ongoing Metro Rail Projects in the cities of Delhi, Jaipur, Mumbai, Kolkata, Bengaluru, Chennai and Kochi has been substantially increased by Rs 2,265 cr to Rs 8,025 cr as against Rs 5,759 cr in the Budget 2014-15.

In addition, Rs 100 cr has been provisioned for the new Metro projects in Lucknow and Ahmedabad.

In a major initiative, the government has proposed a corpus fund of Rs 50,000 cr to promote and finance infrastructure projects in urban areas on shared risk basis under ‘Pooled Municipal Debt Obligation Facility’ over a period of five years. This facility set up in 2006 has corpus of only Rs 5,000 cr.

A new ‘Mission on Low Cost Affordable Housing’ will be launched under which Rs 4,000 cr has been provisioned for providing cheaper credit for affordable housing to the urban poor, Economically Weaker Sections(EWS) and Low Income Group (LIG) segments through National Housing Bank.

It has envisaged supporting 500 habitations for providing safe drinking water and sewerage management, use of recycled water for growing organic fruits, solid waster management digital connectivity through private capital and expertise through Public Private Partnership (PPP) to renew their infrastructure and services in the next ten years.

Emphasizing on Metro connectivity, government has made it clear for promotion of Metro Rail projects including light rail systems in two million plus cities in the PPP mode with central governments support through viability gap funding (VGF).
The budget has also proposed inclusion of slum development in the list of Corporate Social Responsibility (CSR) activities to encourage private sector contribution.

Addressing the concern of middle and lower middle classes due to high cost of financing, it has increased the deduction limit on account of interest on loan in respect of self occupied house property from Rs 1.50 lakh to Rs 2 lakh.

With the aim of promoting investments in infrastructure and construction sectors, which play a significant role in reviving the economy, government has tried to create a conducive tax regime for Real Estate Investment Trusts and the proposed new ‘Infrastructure Investment Trusts’. -PTI

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