Budget expectations by Real Estate Stalwarts

Indian Real Estate market went through a lot of ups and downs in 2017, for both developers and the home buyers it was a wait and watch situation. Homebuyers may be placed at various stages of the real estate cycle as home buying is considered a pivotal change in life in our country. And developers are the ones who play a vital role in the growing of any country. Real estate falls under 18% tax bracket of the Goods and Services Tax (GST) Act with 1/3rd abatement for land. On this back ground we spoke Real Estate stalwarts on their expectations from the Union Budget 2018. Their views are pin pointed in below-

Getamber Anand, Chairman, CREDAI and CMD, ATS Infrastructure Ltd. said – “The real estate opportunity to boost GDP mustn’t be missed by the Finance Ministry in this budget. We expect government to increase the exemption limits for deduction of interest from the income of the middle class and salaried homebuyer. Also the interest rates must further be rationalised as must tax rates as the burden is ultimately passed onto the consumer.” On the supply side, we respect the changes that the government brought in last year into the sector by giving it Infrastructure status for affordable housing”, but RBI has not given any directions to the banks per se on reducing cost of capital for projects which qualify as infrastructure. Also under section 80 IB, the push for smaller houses is welcome but we have requested the government to increase the size from 30 and 60 sq. m. to 60 and 90 sq. m. because this is a practical size which is even aspirationally more attractive to the homebuyer. Also for smaller towns the condition that 80% of FSI must be achieved is not practical and should be reduced to about 50%. Having said that we are very hopeful that the government in its wisdom like last year will bring in some new exciting announcements for the real estate sector this year too.

Shantilal Kataria, President, CREDAI Maharashtra,  said – In last year’s budget infra-structure status was declared to affordable housing but still not implemented in true sense by RBI/ banks – it should be done on priority. PMAY subsidies should be directly through nationalised banks in addition to HUDCO, NHB. Some of the income tax provisions should not be co-related with ready recknor/ circle rates of states. There should not be additional burden of tax on flats sold below ready recknor rates. GST should include state stamp duty or reduce GST rates to 6% {like earlier service tax+ VAT (4.5% + 1%)}. Provide more incentives to first time home buyers.

Shrikant Paranjape, President, Credai, Pune Metro, said –  It is expected that government will give benefits mainly to affordable housing. Amendment to s80IBA so that very large developments can also participate in affordable housing thereby increasing affordable housing stock. Steps to bring in ease of doing business for affordable housing such as Sanctions by architects. Lowering of LTV ratio and risk rating for affordable housing which has hot infrastructure status, so that larger and cheaper housing loans for consumer and construction finance for developers will be available. Consumer centric relaxations like additional housing loan deduction for taxation, interest at lower rate from a special housing fund. Concessional GST at 5% for affordable housing, Relaxation for women buyers In PMAY norms.

Pakshal Sanghvi, Director, Sanghvi Realty, said – I strongly believe that the Union Budget 2018 will be good for everyone. The sentiment in the market is good with the affordable housing policy of the government. Also, lack of trust which used to be a big challenge for the realtors has been effectively addressed by the Government with RERA. There have been many landmark judgments under the act, since the time it is implemented.

By the end of two more quarters, the market is expected to be more stable. Also, Input Tax Credit under the GST module has helped the builders to pass on the benefits to the consumers. A mega advertising and promotion campaign on GST undertook by the Modi Government also helped in making the consumers aware of the different stages and benefits available to them under GST.

Real estate sector may be granted ‘industry’ status, which will help the sector to access long-term financing at a lower cost. The benefits of the low costing will be eventually passed on to the consumers. There should be concessions in the income tax slabs for home buyers. These would positively affect disposable incomes and would help spur sales on the real estate market. Since last year the sentiment was negative due to demonetization followed by a change in the policy environment, the consumers were sitting on a fence leading to a massive slowdown in the real estate sales. If the honorable government could think of lowering the GST slabs for real estate for a period of a year, it will boost the sentiment of the industry.

Stamp Duty and Registration charges which are outside the ambit of GST should be included in GST. Additional tax sops to homebuyers by increasing the Rs. 2 lakh tax deduction limit for a housing loan. Tax incentive for first-time home buyers under Section 80EE hiked from Rs 50,000 to Rs 2 lakh.

Single window clearances, which have been effectively implemented across many sectors, should be made available for real estate too. I strongly believe that this help the developer and his team focus on the core business and cut the time taken for stupendous paperwork.

The current Government has done a lot of work for the real estate sector. The sector will be benefitted in a big way if the above pointers are being considered and implemented.

Shivshankar K R, MD at Inovar Floors India Pvt Ltd, said  – Our industry the flooring is directly related to the real estate sector that includes both residential and commercial complexes. We expect some the benefits to be declared for real estate industry so that the demand picks up and the industry sees more healthy time. We look forward to the benefits that will generate demand in the real estate sector. It will be good if the GST in the building materials that goes in the construction of houses is brought down to 12 % from 18 %.

Ashok Mohanani, Chairman Ekta World & Vice President NAREDCO West, said – Looking at the upcoming election in mid of 2019, the feelers doing the rounds indicate that the Union budget 2018-19 is going to be more beneficial for the poor & Middle segment citizens in the country”. The government will hopefully look into reducing the income tax slabs and various other taxes, benefiting the common man. Bring back the lost luster to Fixed Deposits.

In terms of real estate, the government should increase housing loss set-off limit of Rs.2 lakhs this will allow tax payers to set off a larger part of the house property loss against other income & help boosting demand.

It would be wise to eliminate GST on affordable category, however if not that a lower GST on it like the discussions for 6% is being avidly sought by realtors. Further Interest rate subsidies on home loans must be provided to Middle Income Group households. Like, households earning between Rs 6 and Rs 12 lakh a year can claim a 4% subsidy on home loan amounts up to Rs 9 lakh. Households earning between Rs 12 and 18 lakh annually can receive a 3% subsidy on loans amounts up to Rs 12 lakh. We would want these caps to be raised so that they’re in tune with the ever-escalating costs of property ownership in urban area and yet again reboot demand in the industry.

Reduction in Corporate Tax to between 18-25%, lastly greater incentives to developers to encourage PPP model to achieve PM vision of Housing For All 2022. Furthermore, under section 80IBA of the income tax act, provision 2(b) to be amended to include, in cases where more than one approval has been obtained, the last approval taken to be considered under the act for tax benefits. To further bolster growth in the housing sector, interest exemption should also be included for second homes

Amit Wadhwani, Director Sai Estate Consultants,  said – The year 2018 is going to be very important year from the center’s and state’s perspective as there are election right down corner. In the light of the election in mid of 2019, this year’s budget will be a positive, bullish and strategic, it would be an attempt to impress the citizens. There is been lot of sentiments bashing off the traders and the business owners in India. And in effects of that we saw the results of Gujarat. The budget 2018 should give relief to the tax payers, simplifying of GST norms, ensuring that the GST in certain areas are 28 percent,18 percent should be bought down to 5percent. As far as real estate sector is concerned, there will be GST waiver under affordable housing. There will be reduction or waiving in stamp duty because the way the country is proceeding if there is any further incremental in ready reckoner’s values of respective states in the year 2018 it will actually be a big hit for the development community nationwide. Without the infra and development companies it is very difficult for the center and the states to develop the cities. As far as GST is concerned rates will continue to go down then going up in 2018-19. Charging GST for ready properties is one thing that will also come into play to give a fair complexion between under construction and ready to move homes. Because ready to move homes are more in demand and anything which is in higher demand is taxed higher than the absorption will slow down. The government should not tax ready position property in the budget 2018.

Dharmesh Jain, Chairman & MD, Nirmal Lifestyle, said The union budget is expected to be a positive ray of hope for the realty players this year. Affordable housing is a key driver for growth in the real estate sector and there will be an expectation of a better response from the buyers in the middle income category. Developers will benefit from tax holidays and it will aid in reducing endowment as affordable housing receives infrastructure status. Therefore, the developers will be able to pass more benefits to the buyers.

We are expecting the rationalization of GST rates coupled with merging additional stamp duty and registration with GST or reducing the overall cost could ensure the industry is seeing progress in the right direction.

 Residential prices are expected to be stable in the coming months due to which there will be an improvement in the sales and new launches resulting in an overall recovery. Here is hope that the long term market dynamics for the sector will remain positive throughout, especially in the residential market. The industry is also expecting some reforms in land acquisition that will act as a stimulator for growth in affordable housing. Not only that, it will remove entry barriers for many private players, encourage new launches and ensure prompt delivery of projects.”

Manju Yagnik, vice- chairperson of Nahar Group, said – By all means, 2017 has been a turnaround year for the real estate sector. The industry saw some huge progressive developments and improvements which was needed for the enhancement of the sector. It is now clear that the industry is finally turning in to structured and organized sector. 2017 has been quite significant as the government has announced the right moves to drive growth of real estate sector. Government initiated a number of policies which will give a much needed boost if executed in the right method. As there is a need of approx. 20 million houses the government encouraged the participation of private players to enter affordable housing to achieve ‘Housing for all’ through financial or non-financial support, government has taken a great initiative by developing the PPP model. Apart from RERA and the GST, additional policy initiatives such as REITs, The Benami Transaction Act, Demonetization, are also expected to have a long term impact on the sector. With a tepid market sentiment over the last 2 years, combined with a host of new policy measures, it has never been more challenging to be a leader in real estate. Demonetization, Benami Property act are all steps towards increasing transparency across the real estate sector. The Benami Property Act is expected to bring greater clarity with respect to property ownership. All these measures are in the long run expected to create stable businesses and a mature industry. Also the recent move of linking the Aadhaar with all the property transactions and enhancement in carpet area, Mhada Houses are all positive steps taken for the growth of the industry which is benefitting buyers and developers too. The Indian real estate market is expected to touch US$ 180 billion by 2020. The housing sector alone contributes 5-6 per cent to the country’s Gross Domestic Product (GDP).The market size of the real estate sector is anticipated to grow at a compound annual growth rate (CAGR) of 11.2% in the financial year 2008 to 2020. Commercial real estate, retail, hospitality are growing considerably, proving much needed infrastructure for India’s growing needs. The eco system of property market in Indian real estate is much better now as the economy is showing sign of improvement with stringent act that is thus leading to higher buyer’s sentiments. From the inventory standpoint, developers are sitting over quality inventory which will make the wishes of the home buyers for a ready-to-move in flats come true. The positive and brighter outlook for the year of 2018 comes from the innovative reforms that took place in the real estate sector in the year of 2017.

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