NITI Aayog Proposes Fiscal Incentives to Support Affordable Housing Development in India

NITI Aayog has put forward a set of fiscal and policy measures aimed at accelerating the development of affordable housing in India.

With the country’s urban population projected to rise significantly by 2050, the proposals focus on improving project viability for developers and easing financing constraints for buyers, while addressing structural challenges in the housing ecosystem, as per The Economic Times report.

Push for Tax Incentives for Developers

One of the key recommendations is the reintroduction of a 100% tax exemption for developers undertaking approved affordable housing projects. 

The provision, earlier available under Section 80-IBA, was in effect between June 2016 and March 2022. 

Restoring this benefit is expected to improve financial feasibility and encourage greater private sector participation.

Support for Investment Through REITs

To improve access to capital, the Aayog has proposed tax exemptions on capital gains and rental income earned by investors in Real Estate Investment Trusts. 

This measure is intended to help affordable housing projects raise funds at a lower cost and attract long-term investment into the sector.

Addressing Financing Constraints

The report highlights that affordable housing in India faces challenges beyond land costs and supply shortages. 

Limitations in the financing ecosystem affect both developers and homebuyers, making the segment relatively high-risk with lower returns. To address this, the Aayog has suggested strengthening credit support mechanisms.

Changes to Credit Guarantee and Bond Issuance

Among the financing measures, the Aayog has recommended increasing the loan limit under the Credit Risk Guarantee Fund Scheme for Low Income Housing to ₹40 lakh.

Additionally, it has proposed allowing the National Housing Bank to issue tax-free bonds, with proceeds directed towards concessional funding for projects catering to economically weaker sections and low-income groups.

Measures to Reduce Transaction Costs

The recommendations also include exemptions on land-use change charges, subject to conditions that ensure the land is used exclusively for affordable housing. Further, the Aayog has suggested waiving stamp duty and registration charges for homes constructed under government housing schemes and approved affordable housing projects.

Read More:NALCO Shares Touch Record Levels as Aluminium Prices Remain Elevated.

Conclusion

NITI Aayog’s proposals aim to address both supply-side and demand-side constraints in the affordable housing segment. While the recommendations focus on improving affordability and project viability, their impact will depend on policy adoption, coordination with states, and effective implementation over time.

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