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Pumping up liquidity, kick-starting stalled projects key challenges for new government
The Economic Times  |  May 24, 2019

Kailash Babar ET Bureau MUMBAI

A thumping victory for Narendra Modi-led Bharatiya Janata Party in India’s general elections is set to help the government push forward its reforms agenda in the real estate with both builders and home buyers hoping for measures to revive the embattled sector.

 

The momentum of reforms in real estate, which remained under the spotlight over the last five years for various policy and regulatory measures, is expected to gather pace further. The sector is now seeking the government’s attention mainly to resolve the liquidity crunch, which is choking growth and also to help complete stalled and delayed projects, the biggest concern for the sector.

 

A series of reforms including the implementation of Real Estate (Regulation & Development) Act, 2016, the Goods & Services Act, amendment to Benami Transaction (Prohibition) Act, the Insolvency & Bankruptcy Code and the decision to demonetize high-value currency notes has certainly been helping in formalizing the sector.

 

However, these also disrupted sales momentum in the short-term causing liquidity pressure for realty developers. The liquidity crisis had been growing since some time, the IL&FS and NBFC crisis in the second half of 2018 added further stress. This in turn, has led to the challenge of delayed projects across the country.

 

“There is an urgent need to enhance liquidity in real estate, to help complete stalled and delayed projects and post the parliamentary elections, once the new government is in place, Indian real estate will look forward to seeing prompt action on these lines,” said Niranjan Hiranandani, National President, National Real Estate Development Council (NAREDCO) while highlighting that the new government needs to resolve realty sector’s funding crunch.

 

According to Hiranandani, one time roll-over by the Reserve Bank of India in real estate similar to 2008 in Lehman crisis - this will stop defaults in the sector and help back its quick revival which imperative for the growth of an economy.

 

Given that real estate is India’s leading job creator, the new government’s quick response to issues being faced by the sector will only help push the economy’s growth.

 

“The overall sentiments among all stakeholders &ndash buyers, builders and investors &ndash will remain bullish with this highly pro-development government retaining charge,” said Anuj Puri, Chairman - ANAROCK Property Consultants.

 

However, he also believes the Modi-led government will have a challenging new term when it comes to the real estate industry. The first 2014-2019 regime was the testing ground for most of its initiatives, but their on-ground implementation remained far from spectacular.

 

Since five years are too short a time to undo decades of damage, the industry stakeholders have given this government the benefit of doubt. However, with a fresh term in hand, this government will have to deliver on a lot of these initiatives in 'real' time, Puri added.

 

The government, over the last five years, has already made efforts to achieve its stated objective of ‘Housing for All by 2022’ through Prime Minister Awas Yojana (PMAY) and many such initiatives and that has bolstered supply and demand for affordable housing.

 

Despite that the new government continues to face challenge to enhance the supply further as property prices remain unaffordable for the largest part of the Indian population, and the ongoing credit squeeze on developers.

 

Realtors expect the government to offer incentive for rental Housing to meet the target of Housing for All by 2022 by drafting National Housing Policy and also certain tax incentives.

 

“The new government should take a relook at the current GST structure for Slum Rehabilitation and redevelopment work in Mumbai that accounts for close to 55-60% of all development work being carried out with the balance development accruing from open plots and mill land,” said Gaurav Gupta, Director, Omkar Realtors.

 

According to him, it is a case of double taxation compared to the sale of vacant land which is subjected to a single taxation slab with GST exemption.

 

Realty sector’s key demands

 

  • One-time roll over by RBI for realty developers’ loans similar to the one offered in 2008 post Lehman crisis

 

  • Incentive for rental housing to meet the target of Housing For All by 2022 by drafting National Housing Policy

 

  • Further rationalisation of GST by subsuming stamp duty in it

 

  • Cap of affordable Housing of Rs 45 lakhs for metros like Mumbai-MMR, Delhi - NCR be revised to the higher budget

 

  • Input tax credit be extended against output of commercial renting.