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Budget 2020: Real estate sector urges govt to provide infra status; boost demand to address liquidity, stress issues

The realty industry is looking to draw the government's attention towards needs to take steps to boost liquidity, lower stamp duty, incentivise rental housing and affordable segment, rationalise taxation and lower home loan interest rates. In its annual review of the Indian real estate industry, ANAROCK Property Consultants stated that the sector was devoid of any appreciable forward momentum in 2019. Dwindling consumption, lacklustre investment appetite and the global slowdown overshadowed all possibilities for growth. India's GDP growth rate stuttered and sunk to a six-year low of 4.5 percent in Q2 FY20.The real estate sector's performance - a reliable barometer of India's overall economic health - painfully reflected the macroeconomic state of affairs. The liquidity crisis did not relent and dented any 'real' growth during the year.

Real Estate firms, agencies weighed in with their expectations from Union Budget 2020:

Ashok Mohanani, Chairman EKTA World and Vice President NAREDCO, Maharashtra

The real estate sector definitely needs a stimulus which the Budget announcement can provide. Some of the key expectations from the government for the sector are to improve liquidity, balance fiscal discipline with stimulus, and expedite resolution of stressed projects, few of which are already underway. A resolution on the liquidity crunch and resolution of the NBFC crisis is crucial so providing the requisite incentives is expected. The sector also expects the government to reintroduce the subvention scheme as it will eventually result favourable for both buyers and developers.

With the government’s goal for ‘Housing for all 2022’ the affordable housing is expected to flourish in 2020. To match with on-going price range in metros, it is imperative to increase the limit of affordable housing to 1 crore from the current cap of 45 lakhs or alternately increase the size limit to 60 sq mt from the current 30 sq mt. This will bring more projects and locations under the affordable ambit where a larger section of the population will be benefited. Apart from these, ensuring capital gains on par with shares to provide benefits to developers will help maintain the cash flow in the market.

Pradeep Misra, CMD, Rudrabhishek Enterprises

The real estate and infrastructure sector will be looking for major policy changes and roll-out plans of previous announcements, such as Alternative Investment Fund (AIF) to pull out stressed and stalled projects. More importantly, the infrastructure industry status for the overall real estate sector, along with the provisions of single-window clearance is highly expected by the industry players.

Further increase on existing Rs 2 lakh tax rebate for housing loan interest paid by customer will also be an important announcement, which can help in cleaning the inventory. The finance minister many also consider to tax-incentivize the buyers who are paying installments well in time, or buying the property through their own savings. This will infuse liquidity in the market. A clear-cut guideline in the direction of land reform is much needed to bring down the project cost and make housing truly affordable across sections. It is expected that government will include Input Tax Credit (ITC) in GST for under-construction homes, address the liquidity crisis and clarify the roadmap for Rs 100 lakh crore infrastructure development plan.

Ketan Musale, Director, Dotcom Realty

The real estate sector is very optimistic about the upcoming Budget in 2020 as we hope that it will include provisions to provide immediate relief to all the industry stakeholders. We expect the upcoming Budget to hold provisions to restore the faith among the developers by including long-awaited measures like the introduction of a dedicated Single Window Clearance system for speedy clearances and approvals of the projects. For the homebuyers, we expect the Budget will include additional income tax deductions for the customers buying housing units under the affordable segment. Indian real estate needs to be made more attractive to foreign investors and the Budget is an ideal platform to announce further incentives that will attract more foreign investments into Indian real estate.

The realty sector expects support on skill development initiatives, as it requires skilled workers to handle technology and new-age tools. Moreover, the entire real estate sector should immediately be granted industry status to make it eligible to avail finances from banks on lower interest rates. However, we expect this budget will further help in providing the much-needed fillip to the housing segment.

Amit Jain, Managing Director, Arkade Developers

With a lot of talk about the current Indian economy, slowing GDP, a boost in consumption can be provided by increasing the standard deduction with income slab and not the fixed slab, reduction of tax burden, restructuring of tax slabs or removing the surcharges. The industry hopes that the government take some initiatives to provide stimulus and promote the buying sentiment in the market. For instance, a hike of Rs 2 lakh refund on housing loan interest rate would help increase demand for housing, especially in mid-segment and affordable housing categories.

Representative image. Reuters
Representative image. Reuters

Representative image. Reuters

The government should also look at including Input Tax Credit benefit in GST or rationalise GST on steel and cement. Also, providing incentives for private sector in affordable housing will help developers get funding from non banking finance companies (NBFCs) or financial institutes at lower interest rates. Real estate and infrastructure is the second-largest contributor to GDP after agriculture and needs a boost to revive. The builder community is looking forward to receiving the fillip from the government in the upcoming Union Budget 2020.

Gururaj Bhat, CFO, Karle Group

GST was welcomed wholeheartedly when the government slashed Goods and Services Tax (GST) on homebuyers from 12 percent to 5 percent. With this, homebuyers were benefited and it gave a boost to sales in the residential sector to a minimal extent. But, on the other side, the benefit of GST input credit was not allowed to real estate developers. This resulted in passing on this burden by developers to the buyers resulting in increased cost of the home to that extent. Hence, the benefit of reduction in GST could not be enjoyed to the full extent by the home buyers. I hope this budget will consider the allowance of input tax credit to developers with which such benefits can be passed on to buyers by which the home buyers can buy their dream homes at lesser cost.

The removal of cap on interest on borrowed capital which is presently pegged at Rs 2 lakhs for self-occupied property and the cap on loss from house property to be set off against other income will boost sales of premium luxury apartments of high value. This will result in bringing down the huge inventory under the segment. Hope this budget will address the issue.

Rohit Poddar, MD, Poddar Housing and Development Ltd. and Joint Secretary, NAREDCO Maharashtra

Currently, the real estate sector is reeling under the impact of rise in unsold inventories and lack of liquidity. Although the combination of multiple repo rate cuts, corporate tax reduction, introduction of Partial Credit Guarantee Scheme, setting up of Rs 25,000-crore AIF to provide last-mile funding to developers and establishment of Rs 102 lakh crore roadmap for infrastructure will help in mobilizing the real estate sector, yet the gap to be bridged is enormous. There is a need to redesign the PMAY scheme as per the urban population, as it will largely help them in getting their first homes under PMAY without spending much time in paperwork. It will also help us developers in contributing towards ‘Housing for All 2022’.

Praveen Shetty, Vice President-Marketing, Runwal Group

Year 2019 was an eventful year for the real estate market and there are high expectations from the upcoming Budget. However, it needs a more significant push for a robust development as it contributes largely to the country's GDP. With GST, stamp duty, income tax, and capital gains tax already a burden on homebuyers; an income tax rebate could be provided for new home buyers. The real estate sector has been going through a cash crunch and the current NBFC crisis has worsened it. Therefore the industry hopes, the government will help the sector in raising funds from other sources by relaxing norms.

Anuj Khetan, Director, Vijay Khetan Group

The Union Budget 2020 is awaited with a lot of expectations by all stakeholders, especially for the real estate industry. The developers and buyers hope that the 2020-2021 Budget will introduce reforms like tax sops and correction in prices which will benefit and stabilize the industry. The industry anticipates that the budget should address the long-term expectations for the industry in terms of status, single window clearance and reforms in the Goods and Services Tax (GST). Since, rental housing and co-living are in demand among the homebuyers, I hope that various reform measures are proposed to promote the same.

Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory

The expectation that the real estate sector will contribute 13-14 percent to the nation's GDP by 2025 can materialise if the requisite support to this sector is extended starting this Budget. Incentivising customers for purchase of real estate with a 50 percent reversal of paid GST could go a long way in helping boost demand alongside the much-anticipated change in tax slabs. A slight change in the second-highest tax slab of 20 percent could impact as much as 27 percent or 1.47 crore of individual taxpayers.

Rajan Bandelkar, President, NAREDCO Maharashtra and Managing Director, Raunak Group

We expect Finance Minister Nirmala Sitharaman to take corrective measures that would ease out of the liquidity challenges the sector is grappling with. The ease of liquidity can enable the buyers to make purchases and also support the idea of Housing For All. A real financial impetus to the real estate sector can come with a major overhaul in terms of GST relief and curtailing home loan rates. Rationalisation of taxes and premiums is another area of improvement where stamp duty charges can be included in the GST rate. The sector needs a one-time subvention scheme and restructuring of realty sector loans. Real estate sector needs treatment like information technology sector where tax holidays and moratorium played a key role. Also, slashing of home loan rates will change the demand dynamics among the low, middle and higher-income groups.

The Finance Minister should consider enhanced deduction tenure for taxation purposes, which will boost home buying. To ensure consistency and seamlessness, the government will have to take steps and eradicate the hurdles from the course of growth of the industry.

Manish Ramjiyani, real estate developer, and Managing Committee Member of CREDAI MCHI RAIGAD.

Real estate is generally seen to be a significant contributor to the GDP of the country, an important and decisive marker for the economy. The expected performance and output of this sector has not been meeting expectations due to multiple factors, especially due to the global economic slowdown; the many issues that this sector has been facing need to be addressed besides providing a holistic solution for each of them. There is an increasing need for a one-time rollover or restructuring of loans to solve the liquidity problem. It is crucial to look after the implementation of the Alternative Investment Fund of Rs 25,000 crore in order to rescue stressed residential projects since completion of stalled projects will reassure the confidence of homebuyers as well as boost demand in this sector. Even personal and other tax policies should be revised which might result in healthier demand for affordable and mid-segment housing.

Follow full coverage of Union Budget 2020-21 here

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