Real(ty) bud­get ex­pec­ta­tions

WISHLIST The sec­tor looks for­ward to the Union Bud­get

HT Estates - - FRONT PAGE - Nam­rata Kohli ht­es­[email protected]­dus­tan­

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%

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