The real estate sector has been one of the worst hit in the country, with demand stagnating in the last one year, so much so that players in the sector first sought a cut in key policy rates so that home loans would become cheaper, giving a much-needed push to demand. However, when Reserve Bank of India Governor Raghuram Rajan looked the other way, refusing a rate cut flat out, real estate players were forced to slash prices and offer discounts to push demand for property.
The real estate sector has been one of the worst hit in the country, with demand stagnating in the last one year, so much so that players in the sector first sought a cut in key policy rates so that home loans would become cheaper, giving a much-needed push to demand. However, when Reserve Bank of India Governor Raghuram Rajan looked the other way, refusing a rate cut flat out, real estate players were forced to slash prices and offer discounts to push demand for property.
Keeping the upcoming Union Budget in mind, Surendra Hiranandani, chairman and managing director, House of Hiranandani said that the government has already taken some positive steps to boost the sector. The announcement of smart cities, increasing the FDI limit in real estate and the 'Housing for all 2022' have boosted sentiments of both buyers and developers, he said.
"We are optimistic that the upcoming budget will address key administrative, financial and tax reforms that will spur growth in the future," he added.
Hiranandani also listed out a few key areas where the real estate sector is looking for amendments:
1. Granting ‘industry status’ to the real estate sector
This has been a long-standing demand of the real estate sector. It will help developers avail finance at cheaper rates from financial institutions, which will help spur economic growth. Currently, most industry rules are applicable to the sector, but denying it industry status for funding will only worsen the slowdown in demand because of erosion of capital.
2. Provision for additional interest exemption/ tax-saving on housing loans
The current tax deduction limit of Rs 2 lakh is not sufficient considering the current inflation levels. The government should look at increasing the interest deduction limit to Rs 3 lakh for new home buyers. Similarly, tax concessions on house insurance premiums can be introduced to encourage end users to insure their homes.
3. Simplification of taxes
Promote REITs (Real Estate Investment Trusts) and remove roadblocks such as DDT (Dividend Distribution Tax). There hasn’t been a single REIT listing in India since its inception and we attribute this to the existence of DDT (currently 15%). Removal of DDT (tax levied on the dividend paid to investors) will result in a rush of investment in REITs and this could prove to be decisive for the sector. Additionally, REITs offer the benefits of diversification, safety and easy exit. Simplifying the tax system will provide a major lift to the industry.
4. Additional allocation of funds for infrastructure development will lead to affordable housing
With the government’s ‘House for All by 2022’ initiative underway, it is imperative to allot new land on the outskirts of metropolitan areas in order to promote affordable housing. Incidentally, the government’s target to provide 20 million houses over the next six years can be met if the government and the developers join in the hip in creating unique urban townships. Meanwhile, the government must allocate an amount exclusively for developing infrastructure and improving connectivity in the peripheral areas of cities, especially the metros.
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 "Surendra Hiranandani, CMD, House of Hiranandani")
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