Accommodation Times News Service
To gauge realty sector in present scenario, it can be said that the stakes are high and so are the expectations. With the entire industry and its ancillary segment reeling under the aftermath of demonetisation and RERA, upcoming Union Budget could be their sole saving grace.
There’s no beating around the bush; preceding year was rather difficult for the industry and several market data are testament to the fact. According to a recently released market research report by Knight Frank India, realty sector was brought to complete standstill with 23% fall in the residential sale across top eight in July-December. Among the top eight cities, National Capital Region is the worst-affected market followed by Bangalore and Mumbai. Simultaneously, sales volume dropped by 44% YoY in Q4 2016 and new launches fell by a massive 61% YoY during the same period — incurring a revenue loss of 226 billion to the industry. Coming to Mumbai, the report confirmed lowering of sales by 54% and 41% respectively in the premium markets of South Mumbai and Central Mumbai.
Given the unflattering performance of market last year, the highly unorganized sector is trying to find its feet and industry leaders are expecting nothing short of an overhaul with the announcement of Union Budget 2016-2017 on February 1. Topping the list is the persistent demand for granting of infrastructure status to the sector which contributes to over 15% of India’s GDP.
“Real estate faces several hurdles other than flagging consumption sentiment that have harmed it immensely over the past few years of sectorial slow-down. Clearing all these hurdles in a single revamp of existing policies would be extremely challenging, if not impossible. However, one game-changing measure that new government can certainly undertake in the immediate future is to grant infrastructure status to the housing sector,” says Kishor Pate, CMD, Amit Enterprises Housing Ltd.
Explaining as to why the granting of status might play central role in the revival of the sector, he continues, “In the past, such a provision has proved to be a major turning point for the real estate sectors of many other countries, enabling them to significantly narrow their housing deficits. So far, India has only provided infrastructure status to industries and companies involved in the development of ports, airports, highways, public transportation networks, etc. By granting the housing sector infrastructure status as well, the new government will ensure that housing developers become eligible for critical incentives and subsidies at the Central and State levels. It will also mean that institutional lending to the housing sector becomes more liberalized – banks will increase lending to housing developers, who will also be able to raise bonds to help generate funding for housing projects.”
There is also an urgent need for single window clearance for all realty projects. At present, it often takes 12-18 months to procure all necessary approvals pertaining to layout and building area. Now with RERA seeking stringent provision for compensation in case of delays in delivering house within the promised time-frame, the need for coming up with time-bound clearance in the Budget 2017 is even more pressing.
“While the demand for housing in metropolitan cities is only on the rise, and the industry is not able to bridge the gap between demand and supply quick enough as the already lengthy process of construction is further increased by the difficulty in obtaining permissions,” says Chintan Sheth, Director, Sheth Group.
And then there’s the matter of taxation, proven to be a bane for the realty sector for the longest time. Even though the government has announced major tax subventions, most of these incentives are largely restrictive to one or the other section of society. Naturally so, market leaders are expecting tax incentives under PMAY to give a leg up to the already ailing sector.
“While last year the government announced a 100% deduction of profits to an undertaking from a housing project, aspects such as Minimum Alternate Tax (MAT) continued. The availability of construction finance and interest rates has been restrictive. A simple step to take would be to increase the ambit of the External Commercial Borrowings (ECB) for construction finance for wider range of housing projects and not limiting to the low-cost/ affordable housing. Further, if the government could make available government owned institutional financing to the priority housing projects, it would greatly enable private developers to participate in the same. The government could look at providing secured lending through National Housing Finance boards,” says Anshul Jain, Managing Director, Cushman and Wakefield India.
“We expect the government to look into the taxation slabs for personal and corporate sector, stamp duty and introduce some benefits for the primary house buyers in the affordable housing segment. We propose that the tax free slab to be raised from current level to about 5 lacs and a tax rate cut for personal and corporate taxes. The demonetization process has brought surplus capital into the system which will help increase cash flow into the PSU banks. The stamp duty charges should be reduced down to 2% from the current 5% to encourage more frequent transactions leading to higher revenue growth. We also hope the stamp duty should also be waived off for affordable housing in the Pradhan Mantri Awas Yojana (PMAY), housing for all,” advises Mudhit Gupta, CMD, EMGEE Group.