Is it a good decision to keep income from investments in affordable rental housing complex under tax exemption category?
Recently Central Board of Direct Taxes (CBDT) has added lower income group affordable rental housing to the list of the infrastructure project and will be exempted from income tax. It is a bold decision by the government body to encourage foreign and national investors to invest in an affordable rental housing complex for the long term. This decision is expected to attract foreign investment via debt or equity. The funds’ such sovereign wealth funds, pension funds, income from dividends and to earn interest and long term capital gain investors will queue up for investments.
This a great move by the Central Board of Direct Taxes (CBDT), it is likely to boost the affordable rental housing segment in India. This structural change will bring foreign investors directly or through investment instruments like alternate investment funds (AIFs) and InvITs into affordable rental housing under sub-sector of social infrastructure. The income from this segment will be exempted from any kind of taxes.
I think it will bring much needed investment in the affordable housing segment through this decision. Long term funds will be appropriate for investment in affordable rental housing in the emerging markets like India, that too without any taxes. The rate of urbanization is going up post coronavirus pandemic and demand for affordable rental housing will gradually surge. To catch this untapped segment will be a win-win situation for long term investors.