Pin­ning hopes on the bud­get

In the chal­leng­ing mar­ket con­di­tions, re­alty stake­hold­ers pin high hopes on the Union bud­get 2017

Hindustan Times (Chandigarh) - Estates - - HT ESTATES - HT Es­tates Cor­re­spon­dent ht­es­tates@hin­dus­tan­times.com

It would be an un­der­state­ment to char­ac­ter­ize the cur­rent re­alty mar­ket con­di­tions as tough. For starters, for most end-users, find­ing a house of choice within their fam­ily bud­get is a tough propo­si­tion, that is the case even after five years of sharp price cor­rec­tions. Home prices are still be­yond the reach of most buy­ers. For de­vel­op­ers, mar­ket slow­down means low de­mand, low growth, sharply de­clin­ing mar­gins, and even a ques­tion mark over their sur­vival. Also, the image of hous­ing as an in­vest­ment as­set has been se­verely dented in the last five years as re­turns from the sec­tor turned neg­a­tive. Con­se­quently, the in­vestor sen­ti­ment is sub­dued. In the midst of such gloom, the re­alty stake­hold­ers are pin­ning high hopes on the Union Bud­get to boost de­mand and growth prospects in the sec­tor.

Pro­vide clar­ity on Goods and Ser­vices Tax (GST)

While the GST (goods and ser­vices tax) struc­ture was an­nounced last year, the real es­tate in­dus­try is ex­pect­ing greater clar­ity over what tax rate is ap­plied to the real es­tate and con­struc­tion in­dus­try. Clar­ity is also ex­pected on the abate­ment scheme al­lowed un­der the ser­vice tax regime. Cur­rently, de­vel­op­ers and home buy­ers can ob­tain ser­vice tax ben­e­fits un­der the abate­ment scheme. “In case of an un­der-con­struc­tion flat pur­chase, an abate­ment of 75% is al­lowed, sub­ject to the flat be­ing less than 2,000 sq ft and sold for less than R1 crore, tak­ing the ef­fec­tive tax rate from 15% to 3.75%. If the two con­di­tions are not met, the abate­ment is re­duced to 70% and the ef­fec­tive tax rate to be borne by the home buyer in­creased to 4.5%. If, how­ever, abate­ment rules do not ap­ply un­der the GST regime, the ap­pli­ca­ble tax rate would shoot up dras­ti­cally. More­over, de­vel­op­ers would have al­ready paid ser­vice tax and VAT for pro­cure­ment of goods and ser­vices for their prop­er­ties cur­rently un­der con­struc­tion. Will they be al­lowed to claim cred­its for in­put tax paid? Clar­i­fi­ca­tion would also be needed on whether credit for in­put tax would be al­lowed if the com­po­si­tion scheme has been availed by de­vel­op­ers,” says, Anuj Puri, chair­man and coun­try head, JLL In­dia.

In­dus­try Sta­tus

The long stand­ing de­mand of the re­alty stake­hold­ers for grant­ing in­dus­try sta­tus to the sec­tor is still pend­ing. There are ex­pec­ta­tions that the Bud­get 2017 would con­tain such pro­vi­sion for the sec­tor. “In spite of be­ing sec­ond high­est oc­cu­pa­tion in the coun­try after agri­cul­ture, real es­tate is still not be­ing rec­og­nized as an in­dus­try. We are ex­pect­ing gov­ern­ment to give in­dus­try sta­tus to the real es­tate sec­tor in place of grant­ing only in­fra­struc­ture sta­tus to the af­ford­able homes seg­ment. In the ab­sence of in­dus­try sta­tus, de­vel­op­ers are com­pelled to bor­row money on high in­ter­est rate lead­ing to high cost of the end prod­uct which is not in fa­vor of cus­tomers. Giv­ing in­dus­try sta­tus to the en­tire real es­tate sec­tor would help in push­ing the hous­ing de­mand in the coun­try and help cre­ate lots of em­ploy­ment op­por­tu­nity,” says Mo­hit Goel, chief ex­ec­u­tive of­fi­cer, Omaxe Ltd.

Clar­ity on ben­e­fi­cia­ries un­der PMAY

The gov­ern­ment re­cently an­nounced that in­ter­est rates of 3% would be ap­pli­ca­ble on loans of up to R12 lakh and 4% on loans of up to R9 lakh, un­der the Prad­han Mantri Awas Yo­jana (PMAY). Now that two new in­come cat­e­gories can avail higher loans with in­ter­est sub­si­dies. Re­alty stake­hold­ers ex­pect, the Bud­get to give more clar­ity on the ac­tual def­i­ni­tion of ben­e­fi­cia­ries who can avail of th­ese ben­e­fits.

Pro­vide more tax in­cen­tives to home buy­ers

First-time home buy­ers were given ad­di­tional R50,000 tax ex­emp­tion in the last Bud­get for a house worth up to R50 lakh with a loan of up to R35 lakh. This an­nounce­ment mostly ben­e­fited end-users in tier-II, III cities but not as many in the big­ger met­ros where hous­ing is largely above this spe­cific limit, say real es­tate ex­perts. “While first time home buy­ers should be in­cen­tivised with more tax in­cen­tives for se­cur­ing loans, the gov­ern­ment should in­crease the tax de­duc­tion limit for hous­ing loans. The cur­rent limit of R2 lakh is in­signif­i­cant, given the ticket sizes in cities such as Delhi and Mum­bai, where pre­mium prop­er­ties or three-bed­room apart­ments come over R50 lakh and above. Ad­di­tion­ally, the gov­ern­ment should give more room across each tax slabs to help the end users. Any ef­fort in this di­rec­tion will help the gov­ern- ment to achieve its hous­ing for all tar­get by 2022,” says Gau­rav Jain, man­ag­ing di­rec­tor and chief ex­ec­u­tive of­fi­cer, Jin­dal Re­alty Pvt Ltd. Salar­ied per­sons get house rent al­lowance (HRA) as a com­po­nent of their to­tal salary, and can there­fore claim a sub­stan­tial de­duc­tion in cases where the salary and its HRA com­po­nent are higher. “How­ever, a salar­ied per­son with­out any HRA com­po­nent or a self­em­ployed per­son or those who draw lump sum pays with­out an HRA com­po­nent can only claim a max­i­mum de­duc­tion of R5,000 a month un­der Sec­tion 80GG. The Fi­nance Min­is­ter can make this limit more re­al­is­tic and bring it in sync with to­day’s hous­ing rents,” says, Puri.

The Real Es­tate In­vest­ment Trusts (REIT) can boost growth in the re­alty sec­tor and aug­ment in­vestor par­tic­i­pa­tion in the sec­tor. In last year’s bud­get a ma­jor im­ped­i­ment for suc­cess­ful list­ing of REITS, the Div­i­dend Dis­tri­bu­tion Tax (DDT) was re­moved, this year’s bud­get should, “should sim­plify the tax­a­tion norms for REITS,” says Pra­teek Mit­tal, chair­man, Chair­man of Real Es­tate and In­fra­struc­ture, Re­gional Coun­cil (North In­dia), AS­SOCHAM (Associated Cham­bers of Com­merce of In­dia).

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