Union Budget 2019 India:
I. The primary focus should be liquidity management of HFCs and NBFCs, especially of the smaller ones which are dependent on the banking system. Insolvency and liquidity are two problems which require separate solutions.
Liquidity crunch tremendously affected the GDP growth and employment in the past nine months. To control further damage, RBI must enforce suitable regulatory measures like Asset liability Management, Leverage, Risk Management etc., and stabilize the situation by facilitating liquidity to NBFCs and HFCs in order to service the low-income sector.
Additionally, the well-functioning HFCs and NBFCs must start receiving funds by the banks as they were prior to September 2018. The government along with RBI need to address the lack of confidence and must intervene to regain momentum as it is utterly important for economic growth, GDP, employment, housing, real estate, SMEs and various other sectors.
II. Securitisation of loan pool to banks were a great relief during the crisis. To maintain this, regularisation of fresh funds is required to create fresh book for on-going securitisation. RBI should finalise the securitisation guidelines on priority to make it easy, secure and beneficial.
III. The 'A+' rated NBFCs and HFCs should be encouraged to issue public for diversification of resources. The current terms and conditions of providing 25% redemption reserve on public issuance of bonds could be reduced to 15% and mandate to keep sufficient reserve equal to one year's interest liability on public bonds.
IV. In 2018, the affordable housing fund limit with National Housing Bank was increased from Rs 24000 cr to Rs 30,000 cr by the government to facilitate refinance to HFCs. This year, the funding limit must be increased to Rs 60000 cr to provide refinance to HFCs for housing loans upto 15 lacs in order to give push to home loans to EWS and LIG segments. At least 25% of the annual disbursements needs from this fund should be made available to NBFCs. NHB's current process of releasing refinance should be simplified and predictable with required checks and measures.
V. Regulatory provisions on doubtful and loss assets be exempted from income tax with some ceilings.
VI. Existing Income tax exemption limit of Rs 2 lakh on interest on home loans be increased to Rs 3 lakh.
VII. Annual income tax exemption limit be increased to Rs 6 lakh to align with the annual income ceiling of Rs 6 lakh for the low income group.
VIII. Special restructuring scheme like MSME to be brought as a one-time measure to allow restructuring of all developer loans which have come into distress due to squeeze in liquidity caused by slowing of home loan disbursement and stoppage of fresh loan for construction by NBFC.
IX. Stamp duty for registration of property must be subsumed in GST. It is to be kept 1% for affordable housing, say for property value of Rs 15/20 lakh.
X. Housing and Livelihood – In all cities, particularly in metros, large number of people are engaged in informal sector in multiple income generating activities. State governments or municipalities have not adequately provided sufficient sitting places in every residential or office localities for micro business or hawkers etc.
As a result, these people occupy some place in unauthorised manner at the mercy of local police and municipal inspectors and remain in constant threat. Huge employment can be generated in every city by carving out enough hawking areas. This will not only save small business persons from the daily miseries and harassment by the so called law enforcement authorities but also help office workers, low and middle class residents of the area, to buy food and other daily necessaries at affordable rates and door step.
Municipal corporations as well as the government will also be able to generate huge income by formalising business places for the poor who are otherwise paying money to stay in business in state of uncertainty.
XI. As instant relief from unemployment, concepts like apprenticeship should be introduced. All listed and unlisted companies employing 100 or more people must take unemployed youth as apprentices for one year. Intake should be minimum 10% of the total workforce of the company. Apprenticeship allowance to be decided as 20% or more than the applicable minimum wages of the respective states. Let this activity be included in the list of CSR activities under the company law. Companies who do not qualifying to create CSR fund be allowed tax exemptions on the apprenticeship allowance amount paid.
XII. Under Skill Development, companies be allowed to recruit unemployed youth for giving 2-3 months training through accredited skill development training partners on customised curriculum and then employ them as trainee. The skill development training expenses for 2-3 months and 4 months on-the-job training salary to be allowed to be spent out of CSR funds or if CSR is not applicable then tax exemption be allowed.
(By Deo Shankar Tripathi, MD & CEO of Aadhar Housing Finance)