The Interim budget, passed by Parliament early this year, presented many policies to boost the realty sector. However, with the liquidity crunch continuing to plague financing channels and no improvement was seen in home sales, the industry is pinning its hope on newly minted finance Minister Nirmala Sitharaman to ease their woes.
Relief from the liquidity crisis, the granting of industry status and a single window clearance system for speedy approval of projects are on top of the sector’s wishlist for the Union Budget, to be presented in Parliament in a matter of weeks.
In their pre-Budget memorandum, the real estate sector has requested that stamp duty should be subsumed into Goods and Services Tax (GST) and that the government should come out with measures to ease the liquidity situation. The removal of the `40 lakh price cap for affordable housing is another key ask.
According to Anuj Puri, Chairman, ANAROCK Property Consultants, two main concerns of the sector currently are bringing back buyers and investors to the market and increasing the availability of funds. “The liquidity crisis is the major factor preventing completion of over 5.6 lakh stalled units across top 7 cities. For this, the government could possibly increase the finance limits for NBFCs – a major source of funding for developers. This will help revive the sector to a large extent,” Puri observed.
He also added that introducing more tax sops for home buyers and investors may improve flagging sales. The interim budget had offered a few sops to woo back investors and buyers, but industry executives say there is a need to be more direct, like offering benefits by way of a reduction in income tax slabs, higher relief on housing loan rates, and an increase in the deduction limit under Section 80C of the Income Tax act from the current Rs 1.5 lakh a year.
A recent real estate report on the state of the market by Kotak says that residential real estate grew by 7 per cent year-on-year in the financial year 2018-19, while there was a decline of 6 per cent in launches for the same period. Getting industry status also remains a long pending demand from the sector. “It is time that real estate gets industry status. This will enable developers to raise funds at lower rates and reduce their cost of capital, which would eventually have a bearing on overall project cost.
Also, this budget must also aim to increase the present savings limit so that the young population of the country gets higher spending power and looks at real estate as an investment avenue,” Kushagr Ansal, President, CREDAI-Haryana and Director, Ansal Housing.
Another expectation is a National Rental Housing Policy. The budget is likely to come up with some roadmap in this direction, say officials. “While the government has taken measures to provide fiscal incentives in earlier budgets, we have seen only one REIT listing so far. The government can further push the REITs agenda by reducing the timelines of investment from 3 years to 1 year for capital gains taxation, which will ensure larger retail investor participation,” said Shishir Baijal, chairman and managing director, Knight Frank India.
NBFC crisis hits hard
The continuing lack of liquidity in after the IL&FS crisis broke late last year has severely squeezed credit channels for real estate developers, who are struggling to raise required funds
Industry status
Industry status has been a long-awaited measure that the sector has been demanding, because it will open it up to several incentives and enable them to raise funds at a lower cost
Input Tax Credit needs to be re-instated
Anarock’s Anuj Puri also notes that without ITC benefits, which is the current status, builders are seeing sizeable drop in their profits and will eventually pass the buck on to buyers in the form of higher prices
Strengthen infrastructure push
The sector also wants the government to continue pushing for infrastructure development and increase spending no the segment, since this boosts the economy and helps create more employment