The National Real Estate Development Council (Naredco) has urged the Centre to rationalise the Goods and Services Tax (GST) rate on under-construction properties, by bringing it down to 8 per cent (with land abatement) from 18 per cent (with land abatement).

‘Difficult phase’

“The real estate sector is passing through a difficult phase because of some harsh, though progressive, regulatory and financial reforms such as demonetisation and RERA. A number of measures suggested by Naredco will help address the concerns of the industry to a large extent,” Niranjan Hiranandani, President, Naredco, said here on Tuesday.

This suggestion is also reflected in the pre-Budget memorandum submitted by Naredco to the government.

It also recommended promotion of rental housing and improvement in effective rate of return from rental housing through tax incentives.

Liquidity crisis

The real estate body demanded measures to improve liquidity in the system.

“After RERA, the requirement of product liquidity has gone up by three times because 70 per cent of the money is escrowed in the account and 30 per cent can be used. So, the surplus from the project cannot be used on another project. Therefore, the amount of the liquidity required has gone up,” said Hiranandani.

In the last two years, the liquidity crisis has been met by the funds coming from non-banking finance companies (NBFCs).

However, after the IL&FS disaster, developers are in a quandary and with NBFCs in crisis, the liquidity position is not improving, he added.