Goyal, who took charge of the Finance ministry in the absence of Arun Jaitley offered concessions very few expected of seeing in an interim budget's.
With Nirmala Sitharaman, the Finance minister, set to deliver the budget speech in Parliament on July 5, there have been a number of expectations made by the real estate sector. Here's a look at the expectations:
Shishir Baijal, Chairman & Managing Director, Knight Frank India:
• Industry Status: Availing industry status would enable developers to raise funds at lower rates and cut down their cost of capital and augment their execution capabilities.
• Deduction under 80C: At present, Section 80 C of the Income Tax Act does not provide for a focussed benefit on housing.Tax payers have numerous investment alternatives to choose from and the lack of tax benefit on the principal amount of home loans makes them put their home purchase decisions on hold, thus impacting sales. A separate annual deduction of INR 150,000 for principal repayment will provide the much needed fillip to opt for home loans and inadvertently push real estate sales.
• Affordable housing: To begin with, the government can enhance the eligibility criteria for Credit Linked Subsidy Scheme (CLSS) and GST rate benefits to help a larger section of consumers in urban centres.
• Infrastructure: Besides real estate, another prominent area of intervention is urban mobility. On this account, the government should accelerate its initiatives on infrastructure development which will open up cheaper land parcels for housing and ensure better affordability.
Rajan Bandelkar, President, NAREDCO Maharashtra
• We are highly optimistic about the union budget and are expecting the Finance Minister to take corrective measures that would ease out of the liquidity challenges the sector is grappling with.
• The Government must provide incentives to the bank to re-enable them to lend to the credible NBFCs or directly encourage the banks to provide financial support to the developers.
• We are hopeful of the government to reduce the ROI (rate of interest) on home loans to 6.5% - 7% for affordable housing.
• Also, the buyers must be provided with 90% Loan on the entire cost of the flat including Stamp Duty, incidental development, GST and other charges. The deciding factor for affordability cap should be based on area i:e 60 sq. mtrs and not on the price bracket of 45 lakh.
Anshuman Magazine, Chairman & CEO - India, South East Asia, Middle East & Africa, CBRE
• Capital Flow: In addition to the grant of an industry status, the sector is also expecting the government to further ease ECB (External Commercial Borrowings) norms, so as to ensure steady in-flow of capital from foreign investors. Similarly, introduction of housing bonds, granting special status to HFCs at par with the banking sector, will further help in providing the much-needed fillip to the housing segment across all markets and geographies. For ambitious government welfare schemes such as the much talked about `Housing for All Initiative’ to be a reality, many of such reforms are pre-requisites.
• Corporate Taxation: Recommendations have also been made in terms of reducing corporate tax and an extension in the SEZ sunset. The sunset clause definitely needs an extension, especially in the midst of the anticipated impact of automation and technology on the IT sector. Withdrawal of any tax incentives from SEZs might hit exports and job creation. The government should also roll-out policies targeted at the developer community, while making adequate headroom for positive investor sentiments. In view of the recent NBFC liquidity crunch, there is an ardent need to increase bank funding to developers.
• Cross-Purchasing: From a consumer perspective, buyers should be allowed cross purchasing. For instance, investors should be allowed to invest in residential properties from the sale proceeds of commercial properties and vice-versa. Also, the government should look at allowing investment in any number of properties from the proceeds of a single property, so as to further uplift the residential real estate market. Also, in view of high capital values, rental housing needs a push. Currently, there is a standard deduction from rental income under Section 24 (a) which is 30% of the Net Annual Value of the property. In order to incentivise rental housing, this deduction can be increased to 50% of the NAV.
• Tax Benefits: For the creation of large-scale housing developments, tax benefits under Section 80-IA and Section 35AD (deductions to encourage private sector participation within the infrastructure sector) should be extended to integrated township projects by including the same within the definition of infrastructure facility. This would not only bring in the much-needed housing and infrastructural progression in these areas but will also help to generate employment. As one of the fastest growing sectors and the second largest employer in the India economy, these suggested reforms and new policies could further catapult the growth of the realty sector, along with the economy, through a more cohesive partnership between the Govt. and the real estate sector.
Amit Gossain, MD, KONE India and Chairman, Real Estate & Building Technology, CII:
• There are many positives anticipated in the Infrastructure Sector; the introduction of Tax-Free Bonds to boost investment, streamlining of land acquisition process and increase capital outlay towards Infrastructure Sector by 12-18 percent, to name a few.
• The Budget is also expected to provide direction on the long-term projects being undertaken under Smart Cities Mission, and Atal Mission for Rejuvenation and Urban Transformation (AMRUT) program.
• To continue the momentum for Indian Realty and Project the next wave of the Economic Growth, government should allow tax benefits for investments in Real Estate Investment Trusts (REITs).
Kamal Khetan, Chairman and Managing Director, Sunteck Realty Limited
Starting with the government’s focus on affordable housing, the government should revisit the nomenclature defining this segment in order to accommodate more and more people within the metropolitan regions. To make the affordable housing a viable proposition, the government has to consider relaxing the unit size or the price bracket of the affordable segment. This will help bring people closer to the place of their work and within the realms of city infrastructure.
Rohit Poddar, MD, Poddar Housing and Development
• A paramount reduction in interest rates will spur a drastic improvement in the existing liquidity crisis and will ensure the monetary flow in banks and NBFCs.
• A clear road map for regulations is needed and further corrective measures should be taken to rationalize the GST.
Gururaj Bhat, CFO, Karle Group
We would like to see a reduction of GST on cement from the present 28%. In the absence of Govt not allowing the builder to take input credit of GST paid on steel/ cement, the developer is forced to absorb this to their cost, which ultimately will be borne by the home buyer. Any reduction of GST on cement will certainly boost the residential market.
Ankit Kansal, Founder and MD, 360 Realtors
Besides streamlining RERA implementation, Modi 2.0 should take more proactive steps to tackle growing piles of unsold inventories, along with incentives for developers & cost rationalization. Developers are long waiting for a single window clearance. We are hopeful that in this budget session, the government will take this into account, as this can go a long way towards reducing the cost & time incurred on property development. A part of this correction will also be transferred to end users thereby giving thrust to housing demand.
Parth Mehta, Managing Director, Paradigm Realty:
"The reality of realty sector is amidst trinity of worst three facts including increasing input cost due to abolishing of ITC (input tax credit_ & exorbitant development premiums, excruciating liquidity crisis due to NBFC defaults & rising NPA’s of banking sector and piling up of unsold inventory due to weak consumer sentiment on back of high unemployment. It is one of the worst phase for real-estate as an asset class under-performing by leaps and bounds vis-à-vis others. Hence the wish list of the sector is long which was left ignored in interim budget due to governments focus of populist budget ahead of election. The NBFC fiasco & overall credit crunch of banking system had a domino effect on viability of Real-Estate with access to construction finance largely paused and exorbitant rates of borrowing making project viability questionable."