Whatrealty needs from Union budget 201819?
WAY FORWARD The government has done a lot for the realty sector
Every year, the Union Budget presentstheGovernmentwithan opportunity to tweak the direction that the Indian economy is taking. Sometimes, hard decisions are takenwhich, whilenecessary, do not necessarily go downwellwithMrEveryman. At other times, the Union Budget is clearly meant to be a crowdpleaser. Thisinvariably happens whenanincumbentGovernment is finishing its term and general elections loom, for obvious reasons.
The current Government has done a lot for the Indian real estate industry, evenwhenitwas in the form of hard decisions like demonetization and the disruptive but very necessary RERA. With the hard decisions now taken, the Indian real estate sector fervently hopesthatit is at the receiving endofthe benevolence implied in a populist budget.
Despite the Government’s very proactive stance towards cleaning up and regulating the sector, there arestill several policy-related pain points where the comingUnionBudgetcanmakea decisive difference:
Why this has not happened despite it being a very clear and dire need- evenmoresogiventhe Government’sdreamofHousing for All by 2022 - is a bit of a mystery. Theclearanceandapproval processfor residential real estate projects hasbeenanimpediment for a long time. Although many initiatives havebeentakentocreate a conducive business envi- ronment in the sector, the demandforsingle windowclearancemechanismintotalityis yet to be fulfilled. If implemented, single-windowclearancecansignificantly reducetheoverallprojects cycle time and developers will be able to focus on their core business of project execution. Post-RERA, it hasbecomeallthe more important to facilitate smoothclearancesandapprovals so that there are no execution delays due to procedural hindrances.
Industry status to realty sector
Again, a long-standing demand whichhassofargoneunmet. Real estate is one of the key GDP contributors and the fourth-largest employment generator in India. Extending industry status to the entire real estate sector will help developerstoraisefundsatlower rates and, in turn, reduce their project costs - which will help in pushing demand.
Additionally, the inclusive growth of the real estate sector will help in generating employment across various sectors which are directly or indirectly related to it.
Tax rationalization on REITs
Asoftoday, thefirst REITisyetto belisted in India. Simplifying the taxationnormsforREITsisacritical requirement for listings to start flowing in, whichwill benefit the entire real estate sector by the enhanced participation of a much broader bandwidth of investors.
Higher income tax benefits for firsttime home buyers
As of now, under-construction properties are levied a GST of 12%, whichissignificantlyhigher thantheprevioustaxes. TheGovernment should strive to make GSTatax-neutral proposition so as to help in reviving demand in the real estate sector. Clarity and transparency oninputtax credit will also help in rationalizing the taxes.
GREATER CLARITY AND TRANSPARENCY IN INPUT TAX CREDIT IN THE SECTOR WILL ALSO HELP IN RATIONALIZING THE TAXES
Incentives for green buildings
Theyaretheindisputableneedof the hour in India’s deteriorating urbanenvironment, butthemarginally higher cost of construction of green buildings haskepta majorityofdevelopersawayfrom such projects. Keeping the current and certain future challenges to the environment, the Governmentshouldencouragedevelopers with higher incentives in terms of FSI and/or somedegree of tax exemption to encourage them to adopt green building technologies.
The clearance and approval process for residential projects has been marred by obstacles