Is housing really infrastructure?


Unsaid is another advantage. The tag would make it possible for real estate developers to sell their loans to long-term financial institutions. This will clean up their balance sheets, which means their debt overhang comes down.

Developers claim the move would enable them to pass on the benefits to home buyers. "Easier financing options will help to bring down home prices and ensure timely completion of the projects. This will be hugely beneficial to consumers and help to address the housing shortage of 18.78 million households existing in the country," says Brotin Banerjee, MD & CEO, Tata Housing Development Company.

Problem of definition

But how is this status to be brought about? According to a report by the Secretariat for Infrastructure, Planning Commission, there exist multiple definitions of infrastructure.

The report quotes a 2001 report of the National Statistical Commission headed by Dr C Rangarajan that defined six characteristics of the infrastructure sector: natural monopoly, high sunk costs, non-tradability of output, non-rivalness (up to congestion limits) in consumption, possibility of price exclusion (whereby enjoyment of benefits is contingent on payment of charges), and bestowing externalities on society.

Based on these features, the Rangarajan Commission has classified certain activities as infrastructure: railway tracks, signalling system, stations, roads, bridges, airports, power generation, transmission and distribution, telecom networks, pipelines and canals etc.

The Income Tax Act has its own definition of what constitutes infrastructure for the benefit of tax breaks under Section 80-IA: electricity, water supply, sewerage, telecom, roads & bridges, ports, airports, railways, irrigation, storage at ports and industrial parks/special economic zones.

A taxing exigency

With a multitude of official definitions in existence, what do developers imply when they ask for grant of infrastructure status?

"Basically developers are asking for tax breaks and cheaper and easier funding when they are asking for infrastructure status. Frankly, these ends can be met by other means also without actually classifying housing as infrastructure," says Pankaj Bajaj, president, CREDAI-NCR and MD, Eldeco Properties.

... contd.

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