As always, at Budget time, one of the foremost hopes among real estate players is that the sector will be granted industry status. Enactment of the Real Estate Regulation Bill will be a big step in the direction of recognising real estate as a significant industry.
Industry status to the realty sector would help developers get easier long-term and short-term finances. The Government should look at conferring infrastructure status to affordable housing projects in the country, says Mr Venkat K. Narayana, Chief Financial Officer, Prestige Group.
“This will provide for funds at lower interest rates as infrastructure falls within the priority sector lending of banks,” he adds.
According to him, an affordable housing policy should be formulated to provide better quality housing at reduced costs.
“For such policy action, tax rebates, excise duty reduction, stamp duty waivers and expansion of the interest subsidy on loans from Rs 10 lakh to Rs 25 lakh are necessary,” he points out.
Mr J.C. Sharma, Managing Director, Sobha Developers, adds that 500 million Indians will need new homes by 2050, and “exemption from tax for affordable housing projects will also address the acute housing shortage in the country”, he says.
The tax angle
Last year, a 1 per cent interest rate subsidy was provided on loans for affordable housing. Real estate developers say the scope of this subsidy should be amplified and broadened to include a wider budget housing price-band to benefit home-buyers, especially in lower income groups.
Similarly, in the mid-range and premium range, “if the direct tax to the consumer is raised from Rs 3 lakh to around Rs 5 lakh, this will increase the eligibility of more people for home loans”, says Mr T.S. Sateesh, Managing-Director, Hoysala Projects.
What real estate players are also seeking is a reduction in tax rates; taxes, they point out, form nearly 35 per cent of the sale value of a home. Mr Sharma also says that the inclusion of the real estate sector in the proposed Goods and Services Tax, which can possibly bring down property prices by 20 per cent, will be an important step.
Including the sector under the ambit of a single-tax regime will “simplify transaction costs such as stamp duty and give developers a credit on taxes paid on construction material and services”, he explains.
The implementation of the revised DTC will have strong implications for SEZs, says Mr Narayana. The industry requires clarity on the issues that may emerge, and how businesses would be promoted in SEZs.
Mr Bijay Agarwal, Chairman and Managing Director, Salarpuria Sattva Group, says that the minimum alternate tax of 18.5 per cent on SEZs should be brought down to 10-12 per cent “for the concept to be more feasible”.
External borrowing
With funding proving to be a costly affair for the sector, Mr Sharma says external commercial borrowing (ECB) should be made available, with appropriate safeguards.
Another point in the wish-list of developers is relaxation of norms for repatriation of FDI in real estate.
Currently, it is not possible for foreign investors to repatriate real estate investment proceeds for a period of three years, which is hampering investment flow into India, they say. The market environment needs to be rendered more investment-friendly.
In order to provide a boost to home-buyers, Mr Anurag Mathur, Managing Director, Cushman & Wakefield India, feels there should be an increase in tax exemption on housing loan “in line with the increase in property prices and rising interest rates”.
The minimum increase should be what the Central government is considering, of at least two times the current Rs 1.5-lakh limit, he says.
To create a level playing field in the real estate sector and make it more transparent, there is a “need to set up a real-estate regulator to ensure fairplay and transparency in the industry and protection of consumer interests”, says Mr Brotin Banerjee, Managing Director and CEO, Tata Housing.
A lot of correctional measures will also have to be taken care of by the Government to stabilise the economy, adds Mr Sushil Mantri, Chairman and Managing Director, Mantri Developers.