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5 expectations that Budget 2019 must address, to uplift the real estate sector’s sentiment
Housing.com  |  January 31, 2019

Amit Sethi

With the real estate sector facing the problem of high inventory, low liquidity and high input cost, we look at some of the top issues that one hopes the interim budget will address, for a revival of the sector

 

The Indian economy is expected to remain one of the fastest growing economies in the world. This is possible, only if India’s realty sector performs well, as it contributes a significant portion to the GDP. Hence, there are hopes that the government will address several challenges faced by the sector, in the interim budget 2019. Some of these pertain to taxes, funding and liquidity, rental housing and project approvals. Experts also maintain that while the affordable housing segment has been granted infrastructure status, it would help if this was extended to other segments of residential housing, as well.

 

5 concerns that require attention in the interim budget 2019

 

According to Niranjan Hiranandani, co-founder and MD of the Hiranandani Group, the government should focus on the following concerns, in the interim budget 2019:

 

  • “Incentives for rental housing, to meet the acute shortage.
  • A clear policy roadmap for the creation of rental housing stock and exemption from the burden of tax on notional rental income.
  • Rationalisation of GST in case of under-construction properties &ndash the GST should be pegged at either eight per cent with an input tax credit or five per cent without the input tax credit.
  • Focus on financial re-engineering concepts, to overcome the NBFC crisis and the challenge caused by the IL&FS default.
  • Incentives for new asset classes in real estate, like affordable housing, warehousing and logistics, co-working spaces, co-living spaces and light industrial spaces.”

 

Another demand that has been repeated in previous budgets, includes a smooth process for granting permissions and clearances, in a time-bound manner.

 

While generous funds were allocated for various highways projects in the previous budget, experts maintain that pace of building roads should increase, as improved connectivity is the lifeblood of the real estate industry.

 

Apart from that, the creation of more employment in the infrastructure sector can redeem the incumbent government’s well-documented shortfall on that front.

 

The expectation of the real estate sector, from budget 2019

 

Ashok Mohanani, chairman of Ekta World and vice-president, NAREDCO West, feels that home loan interest rates are the foremost concern of home buyers. “If the tax deduction limit is increased up to Rs five lakhs from the present Rs two lakhs per annum, there will be a positive impact, which will help home buyers to save money on home loans,” he says.

 

The finance minister also needs to adopt a holistic view, while making proposals for real estate. As per data available from the Ministry of Housing Affairs, the total estimated investment under the Pradhan Mantri Awas Yojana (PMAY), as on January 2019, was Rs 3.87 lakh crores, of which the central government has sanctioned approximately 27 per cent, while only 32 per cent of the sanctioned amount has been released so far. Evidently, despite the government’s concerted efforts towards achieving its objective of ‘Housing for All by 2022’, the deficit is too large to ignore.

 

Interim budget 2019: A wish-list for real estate

  • Major tax benefits for home buyers.
  • Re-financing for NBFCs by raising limits.
  • Determined push towards infrastructure, to drive growth.
  • Ensure serious on-ground activity, vis-à-vis money spent on the PMAY scheme.
  • Easing the norms for REITs on the eve of their deployment.

 

Budget 2018: Top 5 expectations of the real estate sector

 

With the Union Budget 2018-19 set to be announced on February 1, 2018, various stakeholders in the real estate industry have their own wish-lists. Here’s a look at the top five demands

 

January 31, 2018: Post demonetisation and a series of reforms such as the Goods and Services Tax (GST), the Real Estate (Regulation and Development) Act (RERA) and the Benami Transactions Act, growth in the property market has remained subdued. With the Union Budget 2018-19 set to be announced on February 1, 2018, the stakeholders in the real estate market are hoping that the government will make announcements that will uplift the sentiments in the sector.

 

Niranjan Hiranandani, National President of NAREDCO and CMD of Hiranandani Communities, sums up the major budget expectation as follows:

 

“Granting of industry status to the real estate sector, has been a long-pending demand. In the previous budget, we saw affordable housing being given infrastructure status and its benefits have been clearly visible. Now, we need to extend this to all segments of real estate.

 

If the budget focuses on giving a boost to infrastructure and housing, it will have a positive impact across multiple sectors of the economy. It will increase the creation of jobs and provide more money in the hands of consumers for spending, in effect, improving liquidity in the market.

 

Finally, good thoughts need to be translated into constructive action. There is a need to stop looking at solutions in a piece-meal manner and for budget proposals relating to real estate, to start looking at holistic models that work across market geographies and segments.”

 

Developers are also asking for greater clarity pertaining to the GST regime. With multiple taxes, such as GST, stamp duty and registration, being levied on property transactions, buyers have become hesitant to invest in real estate, they argue. Buyers, hence, are looking for rationalisation of the taxes by the government.

 

Vijay Kandhari, managing partner, B Kandhari Properties, lists two points that the government can consider, to uplift sentiments in the real estate sector.

 

“GST, in its current form, covers only under-construction properties. It would help, if the benefit of input tax credit is available for all properties. Stamp duty should also be subsumed into GST, to minimise the tax burden on buyers.

 

Under Section 54 of the Income Tax Act, capital gain benefits are made available to buyers, who sell their property and acquire a new one, within a stipulated period of time. However, if the possession is not provided on time, there is a penalty on the developer under the RERA, but no benefit to the buyer who still has to pay the heavy tax. We hope the upcoming budget addresses the concern of taxation on capital gains, in terms of leniency to be given in cases where possession delays are not the fault of the buyer.”

 

Developers are looking for more incentives for home buyers in the budget, to enhance sales, at a time when many buyers are adopting a ‘wait and watch’ approach. We all know that the sentiments in the real estate sector, depend on the government’s support to the masses, in purchasing and selling property. Hence, any improvement in the benefits to buyers, will result in faster growth in the sector, Kandhari concludes.

 

Budget 2018: 5 key expectations for the growth of the realty sector

 

  1. To strengthen infrastructure that could support consistent real estate growth in the long term.
  2. Stamp duty should be subsumed under the GST.
  3. More tax incentives for home buyers.
  4. Doubling of the tax benefit available for first-time home buyers from the current level of Rs 50,000.
  5. Granting of industry status to the entire real estate sector.