With the real estate industry facing a liquidity crunch and multiple taxes adding to the burden on home buyers amidst a slowing economy, the expectation is high of the real estate fraternity from the first budget of Modi Sarkar 2.0. The aam aadmi always hopes that the Union Budget will have announcements that will impact their lives positively- for example, by improving their income and helping them to get jobs. Similarly, the real estate sector too hopes that the budget will alleviate their major problems and boost growth in the industry.
Solution to funding issues
The real estate sector has been facing a significant funding crunch, which was aggravated by the distress in the NBFC (non-banking financial company) sector. “The realty sector is expecting the government to ease ECB (External Commercial Borrowing) norms, to ensure steady inflow of capital from foreign investors. Similarly, the introduction of housing bonds, granting of special status to HFCs (housing finance companies), at par with the banking sector, will further help in providing the much-needed fillip to the housing segment, across all markets and geographies. For ambitious government welfare schemes, such as the ‘Housing for All’ initiative to be a reality, such reforms are prerequisites,” asserts Anshuman Magazine, chairman and CEO – India, Southeast Asia, Middle-East and Africa, CBRE.
Support for affordable housing
While the government has taken several initiatives to boost affordable housing in the country, experts maintain that there is room for more steps. According to Nimish Gupta, MD south Asia, RICS, investments in infrastructure development are likely to have a substantial share. This should help in increasing developers’ access to funds, for the development of affordable housing projects, in addition to initiating rental housing, he adds. “Highest levels of compliances and adoption of business best practices will, therefore, need to overlap with advancements in technology and delivery mechanisms, for the affordable housing scheme,” says Gupta.
The real estate sector is also expecting further relaxation in the GST rates. Recommendations, to cut the corporate tax and extend the SEZ program, have also been put forth. There is fear that if the tax incentive for SEZs is withdrawn, it could severely hit the job creation ability of the sector. Praveen Dhabhai, COO, Payworld, points out, “We expect Modi 2.0 to think towards the reduction in GST, for remittances where the margin is wafer thin. The current GST rate is levying a huge burden on the end consumers.”
Cross purchasing of residential and commercial properties from sale proceeds
At present, there are restrictions on tax benefits, if the seller of a residential property uses the sales proceeds, for buying a commercial property, or vice-versa. Analysts are hoping that the government will take the initiative, to allow the use of sale proceeds of residential property to purchase commercial property and vice-versa.
The union budget should focus on a holistic plan for infrastructure and housing development, in the peripheral locations and tier-2 and tier-3 cities, says Magazine. A boost for infrastructure, will not only benefit the realty sector but also help other industries and create large scale employment in the economy.
“For the creation of large-scale housing developments, tax benefits under Section 80-IA and Section 35AD (deductions to encourage private sector participation within the infrastructure sector) should be extended to integrated township projects, by including the same within the definition of infrastructure facility,” Magazine concludes. Housing.com