Smart City must be allocated with funds : Real Estate Industry

arunjaitleyBy Accommodation Times News Bureau

Despite the variations in investment quantum across cities, there are some common threads which run through most of the Smart City plans. The most important one is around financing. Even after considering Government of India and counterpart funding from the State Government as well as the municipality, for most cities there exists a financing gap of at least 20% of the total investment plan, which would need to be met through private participation. In absolute terms, this would translate to over Rs. 200 crores for 100 cities, across areas like water supply, sanitation, solid waste management, mass rapid transit systems. Many of these projects are proposed to be awarded on build operate transfer (BOT) or build, own operate (BOO) basis, leading to a further increase in associated risks, says Mr. Arindam Guha, Partner, Deloitte Touche Tohmatsu India LLP


He further added that the forthcoming budget provides a good opportunity to incentivize potential private partners by exempting income arising out of such investments from tax. With exemptions under section 80 IA being phased out from April, 2017, the Government may consider extending benefits similar to what has been extended to specific housing projects under Section 80IB-A to all Smart City projects. This would also ensure that exemptions are only granted to projects which are approved and also completed within a specified time frame, thereby encouraging timely implementation. The other important component of financing where budgetary provisions could make a significant impact is earmarking a corpus for setting up a Smart City infrastructure guarantee fund. The fund could be used for guaranteeing loans availed by the Smart City Special Purpose Vehicle (SPV) as well as area development and pan city projects, provided certain basic eligibility criteria around finance and governance are met. Alternately, the credit enhancement facility being set up by Life Insurance Corporation of India (LIC), as announced in the last budget, could be extended to cover Smart City related bond issuance.

Mr. Ravindra Pai, MD, Century Real Estate says  “We believe that with two of the most significant reforms which will contribute to the cleaning up of Real Estate in the long run which is the Demonetisation and implementation of RERA in the year 2016 as also the stated objective of Housing for all by 2022, we are at an inflection point with respect to the Real Estate industry. We are hoping that in this budget, the term affordable housing is clearly defined and also accorded “Industry Status”. We would also like to see more spends as also concrete steps in the digitisation of land/property records which is in tune with the digital India vision of the PM.  This will considerably reduce litigation, free up more lands in cities to make it more affordable and reduce project timelines which will directly translate to lower costs to the end consumer.”

Mr Girish Shah- Director, The Wadhwa Group added that Given that the IMF has recently cut India’s growth estimate for 2016-17 to 6.6% from its earlier projection of 7.6% due to the impact of the government’s move to scrap some high-value currency notes, the real estate industry at large will keep a close watch for the Union Budget presentation with guarded caution. However, as an organization, we have always supported positive reforms and progressive policy implementations for the sector, thereby boosting market sentiments and the economy.  While demonetization has had its effects, we are optimistic about amendments and addressal of certain key areas such as: 

  • ·         Implementation of GST with a more unified taxation 
  • ·         Clarity on the land acquisition policy
  • ·         REITs to get activated soon 
  • ·         Implementation of policies that bring in transparency into the sector like RERA and Benami Transactions Bill
  • ·         Make housing affordable by reducing the cost of finance for both developers and buyers

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