Realty records amazing rush in low-cost housing

The showering of sops and other tax exemptions have attracted a large number of property builders especially those engaged in organized sector to join the affordable housing segment, Icra, said in a recent report. It further added that for realtors, affordable housing project with execution cycle of 3.5 years and profit before tax (PBT) margins of 16%, the tax exemption would result in a boost to the equity IRR by around 3 percent. The incremental returns estimated are moderated by the fact that minimum alternate tax (MAT) would be payable on the book profits from the project, notwithstanding the income tax exemption under Section 80IBA. The 3 percent incremental return estimated does not factor in benefits which could be available to the developer by way of offset of MAT credit against taxes arising out of other projects on the same balance sheet. As such, the overall benefits available to the developer are significant and likely to result in increased participation from organized players in the housing market.