Apart from reconsidering the definition of affordable housing which include a city-wise listing of parameters, the Centre needs to bring in guidelines that expedite local-level and environment-related clearances for projects.
Delay in receiving approvals are pushing back project deadlines, especially large sized ones of 20,000 square metres (due to environment approvals ) and above, by 12-odd months thereby leading to a cost escalation of at least 10–15 per cent, which are ultimately passed on to the end-user or homebuyer, says Rajan Bandelkar, President, NAREDCO.
NAREDCO or National Real Estate Development Council is a self-regulatory body under the aegis of the Union Ministry of Housing and Urban Affairs.
According to Rajan Bandelkar, architect certification can be encouraged as an alternative for smaller projects and modalities worked out so that approval delays do not push back deadlines. Maharashtra is already working on these lines where empanelled architects certify projects below 150 square metres thereby speeding up the approval process.
“Clearances still take a long time, delaying projects by at least 12 months or so. On top of that environment clearances, airport authority clearance and such other departmental procedures take up time and increase project cost,” he told BusinessLine during an interview.
As States’ already have their respective real estate regulatory authorities , issuance of commencement certificates, which allow developers to sell projects, can be delayed if specifications are not in order.
Affordable housing definition
According to Bandelkar, one of the Budget expectations include the Centre relooking at the criterion defining affordable housing. The definition should be based on size of homes and not their price.
“Ideally, affordability of homes should be determined by their size, say about 60 square metres or even the city. A mere pricing criteria defies logic, as affordability varies from person to person, city to city. Moreover, as cost of construction rise, it will impact end user price,” he said.
There is also a hope that Credit Linked Subsidy Scheme (CLSS) will be extended without any timeline for both low income group (LIG) and middle income group (MIG) segments till the budgeted funds under the Pradhan Mantri Awas Yojana (PMAY) are fully utilized.
“And then like others I too hope the Union Budget will increase home loan interest deductions to ₹5,00,000 (as against existing ₹2,00,000), enhance quantum of real estate stress fund up to ₹1,25,000 crore, and provide ECLGS (Emergency Credit Line Guarantee Scheme) funding,” he said adding that the suggestions have already been passed on to the Finance Ministry.
While home prices are expected to a see nearly a 10 per cent odd rise on the back of constriction cost rise, developers may not immediately initiate hikes as they do not want to dampen buyer sentiments.
Input Tax Credit
Currently, there is a Goods and Service Tax (GST) of 5 per cent on under-construction residential units and 1 per cent on affordable housing, but without input tax credit (ITC). GST is not levied on completed units.
The GST on cement and steel is 28 per cent and 18 per cent respectively and the tax outgo has spiked along with the rise in these commodity prices. As the developers cannot claim tax credits for GST paid on input items, this amount gets added to the construction cost and leads to higher apartment prices for homebuyers.
“This means cascading effects of tax. If ITC were allowed, it could help keep home prices range-bound. The government should also look at reducing the GST rate on cement to give a boost to construction activity in the economy,” Bandelkar said.