Calling for an inclusive housing policy and special housing zone to boost small and affordable houses, developers apex body Credai has appealed to finance minister P Chidambaram to initiate widespread tax incentives for making real estate the new growth engine of the economy.

In his Budget Wish List, Credai national president Lalit Kumar Jain suggested to the finance minister to allow tax exemption for small houses of under-60 sqm of carpet area and creation of special housing zones with tax exemptions on the lines of SEZ for constructing 45 sqm houses for low income groups and 30 sq mtr houses for the economically weaker sections. The country's housing shortage is very high at 18.1 million houses and an incremental need is around another 10 million houses.

"It is high time that the government took a pragmatic and practical look at the real estate sector today and take steps that help the industry in particular and the economy in general," he said.

Jain pointed out that the introduction reliefs under sections 80IB and 80 IA of Income Tax act in 1998 had given a big boost to the entire economy as the direct tax benefits resulted in multiplication in indirect tax revenues of centre and huge gains to the states through stamp duty and other taxes. Even municipal bodies earned well through octroi, premiums and cess. Besides, the employment generation was also phenomenal. Real estate contributes as much as 5.5% of to the GDP and together with the construction industry the share goes up to 11%. Even in China, which is more known as manufacturing hub, the contribution of real estate to its GDP is as high as 30%.

"We see no reason as to why real estate cannot become the new growth engine for the Indian economy," Jain said and pointed out that the sector is highly labour and capital intensive. Over 400 industries depend on the real estate and construction and that is how we can ensure sky high growth of the GDP. He regretted that over the last nine months credit to commercial real estate has gone down by more than 13% and priority lending to housing sector by 1.29%. The total lending to CRE is a mere 4%. Jain argued that the present risk weightage of 1.25% given by the RBI resulted in choking of bank finance to real estate which in turn impacted the availability of housing stock and the prevailing market-driven high prices.

Credai, therefore, suggested scrapping of the RBI risk weightage and called for banking reforms and facilitate easy and low-cost funding for housing to encourage developers increase the supply and bring down prices.