Real(ty) budget expectations
WISHLIST The sector looks forward to the Union Budget
Aheadofthe2019elections, there aremanyhopesandexpectations fromtheUnionBudget2018-19for the real estate sector and homebuyers.
The last two years were both “disruptive” and “decisive” in cleaning uptherealestate sector. Demonetization, GST, RERA – the “triple tsunami” seemtonow pavethewayforamoretransparent real estate industry and greater consumer confidence. Year 2018 is being seen as the “yearofdelivery” of past projects and discreet RERA-compliant project launches as well.
UnionBudget2018-19is significant, in that, it could be the last full budget before the 2019 elections andaseconomistsputit–“it will be surprising if there are announcementsthatarenotpeople friendly”. Will Modi bank on the budget to garner support before his five year old tenure ends in 2019.
Therearefive majorthings on the wishlist of the real estate sector. First is a longstanding demand of conferring an industry status to therealestate sector. The Union Budget 2017-18 had granted “Infrastructure” status to affordable housing- a status that reduced the cost of borrowing for real estate developers, gave easy access to finance and spurred investments, opening of external commercial borrowing (ECB) routeandtaxationbenefits for the developers.
According to Ramesh Nair, CEO and Country Head, JLL India, “Sofarthegovernmenthas selectively bestowed the status ononlyaffordablehousingbringing it into the infrastructure fold. Giving the same status to real estate will open up strong possibilities of faster developmentand greater private participation on the back of financial options, tax exemptions on revenues and profits as well as access to preferential lending for key sector developments.” The status will help the sector to access longterm financing at a lower cost. Says NAREDCO Chairman Rajeev Talwar, “Industry status is something which is long overdue to the sector. Government shouldhelpdevelopersingetting better access to funds and also incentivize homebuyerstocreate demand for the sector, which is facing a lot of challenges.”
The‘HousingforAll2022’ is an ambitious target of GoI and further incentives are expected to boost affordable housing segment. AccordingtoSamirJasuja, founder andCEOatPropEquity, “Affordable housingsegmentisa keypillar of Indiangovernment’s ‘HousingforAll’policy. Developers have launched several projects to cashinonsubsidiesunder PMAY (Pradhan Mantri Awas Yojana) eligible projects which include several affordable housing projects pan-India. And we can expect some positive announcement on this segment in the upcoming union budget.” Developersexpectareductionon n cost of land to help them build budget homes.
Second is reduction of taxes especially GST. According to Jaxay Shah, President, CREDAI National, “We expect deep concessions in income tax for home buyers of at least Rs. 5 lakh per annum. Housingisabasicnecessity andyetsubjecttobothGSTat 18percentandstampdutyof8per cent. Thereis acase to bring GST in line with other merit goods.” Rationalisation of the GST by capping it at 6 per cent withinput tax credit for the entire segment in real estate will help revive and boost demand,” says Naredco NationalPresidentNiranjanHiranandani.
The industry expects GST rates to be brought down to 6% which will be at par with the preGST rates. Reducing the stamp dutychargesorbringingitunder the ambit of GST in the lowest slab is another demand of builders.
For affordable housing segmentinparticular, theGSTneeds to be significantly reduced, says Pradeep Aggarwal, Chairman- Assocham National Council on Affordable Housing, “For someonebuyingahouseofRs80lakhs, Rs 1 lakh as GST is ok but for someonebuyingahouseforRs20 lakhs, Rs 1 lakh as GST is a lot of money. This should be rationalized andGSTforaffordablehousing segmentshouldbereduced.”
Third is single window clearance, which has been implemented across many other sectors, but continues to be the ‘Achilles’ heel’ for the real estate industry. The project approvals and clearances process lead to delays in project execution. For ease of doing business, there should beanonline, streamlined andcentralized project approval procedure. This will help the developer and his team focus on thecorebusinessandcutthetime takenforstupendouspaperwork.
Fourth is to incentivize rental housinginthemannerofaffordable housing. Animportantfactor for social welfare, rental housing is essential for all categories -StudentHousing, SeniorLiving(long lease) andexecutive rental housing in growth centres. To incen- tivize rental housing construction in the country, which is at dismal low, in comparison to other developing and developed counties, “wemusthaveaflattax rate of 10% or increasing deduction limit from 30% to 50%, “suggest NAREDCO. “We must do awaywithnotional incomefrom propertyheldasstockintrade, by the developers.”
Fifth is to incentivize the first timehomebuyer, in ordertorevitalize the housing market. AccordingtoAnshulJain, Country Head, India Cushman & Wakefield- “At present, a first time homebuyer can claim an additional tax deduction of up to Rs 50,000 per year for a loan amountlessthanRs35lakhsand for a house value less than Rs 50 lakhs. This limit of Rs 50 lakhs is on the lower side and would exclude a large chunk of homebuyers and such houses will be available only in peripherals of most metros. In the budget, the government should increase house price limit, and the tax exemptionlimit in accordance to the home loan taken. Additionally, the governmentshouldconsider increasing the deduction limit of interest paid on home loan from Rs 2 lakh to Rs 3 lakh.”
This will give a push to homebuyers who are onthefence, and in the long run, clear inventory with developers.
Finally, “no red tape, only red carpet” – what Prime Minister Modi told the CEOS at Davos (meaningthegovernmentisrollingouttheredcarpettoinvestors andwasremovingredtape) is the crux of all expectations of every industry from Union Budget 2018-19.
The sector expects GST rates to be brought down to 6%