While the 2011-12 budget offered a mixed bag to the realty sector, developers believe that very little was extended to them and customers and not enough steps were taken to improve the significance of the housing sector. “Even today the Indian real estate sector has been facing its problems like slowing economy, delay in decision making process, and hike in interest rates,” says Dhaval Ajmera, Director of Ajmera Realty and Infra India.
However, the real estate industry remains optimistic and looks forward to some reforms in the coming budget. The real estate sector is primarily looking forward to the RBI’s intervention to control the inflation which has adversely affected the industry. A sheer relief could be by bringing in affordable housing. “The Government wants to increase more housing stock, but we expect tax exemption for rentals and on profits. For instance, if the flat is less than 1,500 sft, the returns from it should be exempted from income tax,” says G Yoganand, President, CREDAI, Hyderabad Chapter and Chairman, Manjeera Group.
Affordable housing should be considered important with priority lending given to banks who could in return offer concessional costs to keep the cost of tenements within the reach of common man. “The budget should look forward to extending the existing benefit of Section 80 IB (10) of the IT Act for developing affordable housing as the country is still in a huge shortage of tenement,” adds Ajmera.
Last year, one percent rebate was provided for affordable housing costing between Rs 10-15 lakh. Anuj Puri, Chairman and Country Head, Jones Lang LaSalle India is of the opinion that the scope of this rebate should be amplified and broadened to include a wider price band of budget housing so as to boost the flagging sentiments in the housing sector.
Experts are of the opinion that the interest subvention of one percent on home loans could be raised from Rs 20 lakh to 30 lakh due to increase in cost of raw materials and various taxes incurred during home buying. Additionally, allocating more funds to the Rajiv Gandhi Avaas Yojana will do well to the real estate sector.
The real estate industry is also hoping to get an industry status as the sector is a major driver for economic growth and generates countless jobs across its various verticals. As the second largest employer in the country contributing five percent to India’s GDP, Indian Realty deserves a preferred treatment to give a further boost to our economy. Industry status would help the sector to access debt lending at more competitive interest rates and lower collateral values.
“The real estate sector should be granted industry status. It is a big employment generator in the country, and it gets no support from the financial sector. Getting the industry status will improve the sector. The government is moving in the right direction by passing stricter legislations. Also, the relief on income tax should be increased from one lakh, for people who have taken a home loan. Real estate suffers because it is not a priority sector and banks don’t finance real estate projects. However, this year seems better as the market is improving,” says Bimal Kedia, Managing Director, Theme Ambience Constructions.
There is a severe shortage of finance and whatever finance is available is coming in at a huge rate which is fuelling the realty prices and also many a times makes developers scrap the launch of new projects. The real estate industry also expects the Finance Ministry to relax the norms on FDI and ECB, especially for township projects which will give developers source funds at a much reasonable cost. “Relaxing norms for repatriation of FDI in real estate is the need of the hour. Currently, it is not possible for foreign investors to repatriate real estate investment proceeds for a period of three years, which is hampering investment flow into India. The market environment needs to be rendered more investment-friendly,” says Puri.
Meanwhile, an increase in infrastructure spending in urban areas with a view to unlock the value of neglected and hidden land assets in suburban and peripheral districts is expected. “With growing urbanisation in metros, the real estate sector is seeing huge opportunity for creating newer townships. It is vital that the government promotes townships alongside industrial belts and give developers fiscal benefits to township development to entice developers in this segment,” says Ajmera. Additionally, clear guidelines should be announced by government in order to avoid any kind of ambiguity on point of levying Service Tax on under construction projects.
Yoganand adds that considering the fact that nearly 35 percent of sale value of a home consists of various taxes such as excise, VAT, service tax, stamp duty among other things, “we hope that the Budget 2012-13 would bring about appropriate reductions in their tax rates, bring down registration charges to less than five percent to the delight of home buyers who are already burdened with high interest rates on housing loans”.
Source: Times Property, Times of India, Hyderabad
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