Realtors seek lift from sops to taxpayers

The real estate industry is not expecting any big announcements or sops in the upcoming budget as it is an interim one. 

However, with general elections round the corner, industry players expect sops to taxpayers in the Budget that would indirectly benefit the realty industry. 

“The income tax exemption limit for individual income taxpayers may get raised as the government hasn't revised it for years now. This can be through increasing interest or principal home loan slabs only for first time buyers. This would help in giving further boost to the affordable housing segment,” said Pankaj Kapoor, managing director, Liases Foras Real Estate Rating & Research.

Already, there is an uptick in the affordable housing segment in the last three years because of multiple policy decisions taken by the Union government, one being credit linked subsidy scheme (CLSS) and the other lower GST rate on this segment.

In December 2018, the government extended CLSS on home loans for the middle income group under the Pradhan Mantri Awas Yohana (Urban) up to March 2020. This measure ensured more home buyers get benefits.

“This will prove to be another major push towards the progression of the affordable housing segment,” said Jaxay Shah, president, Credai (national), a real estate developers association.

A look at the previous few years shows that the industry has already been through several speed breakers and continues to struggle. The latest being NBFC and HFC liquidity crisis.

Farshid Cooper, managing director, Spenta Corporation said the two aspects presently hindering the growth of real estate today are affordability and liquidity. Transaction costs for home buyers have become prohibitive, and that is encouraging more and more people to choose renting over buying. With net GST at 12% and stamp duty as high as 6-8%, depending on the state, home buyers are finding it unaffordable to purchase a house. These aspects need a closer look and a different approach is encouraged. In recent times, liquidity has been a significant hindrance for several developers and HFC's. With tightening norms around home loan eligibility, several people are left out of the ambit, and this can be dangerous for the long-term growth of a sector.

“The real estate industry experienced protracted impact of structural reforms undertaken over the last 24 months, such as Real Estate (Regulation and Development) Act, 2016 (RERA), GST, and demonetisation, that collectively changed the way business is conducted in the country. The Indian real estate sector, while largely optimistic, had their sets of woes to deal with during the year with various asset classes reacting differently to the global and domestic stimuli,” Shishir Baijal, chairman and managing director, Knight Frank India, said.

According to him, the residential sector remains subdued. There has been an uptick in the number of launches, but consumer demand has been lacking momentum, especially in premium and luxury residential segments. “However, we see an uptick in the affordable housing sector – both from supply and demand side which leads us to believe that it would be a key driver for residential sector in coming times,” Baijal said.

Niranjan Hiranandani, co-founder and managing director of Hiranandani Group, national president of National Real Estate Development Council and senior vice-president, Associated Chambers of Commerce and Industry of India is optimistic from the upcoming Budget and believes that several measures may a mention right from providing with some more incentives for those residing in rental homes to bringing correction in circle rates or ready reckoner rates among others.

Meantime, the 32nd Goods and Services Council (GST) Council meeting was unable to reach to a common consensus on reducing the GST rate from 12% to 5% on housing, which has been a long-standing demand of the industry. 

There were two proposals in front of the GST Council on the housing sector. The first was to maintain a fixed 12% GST rate, including full input tax credit (ITC) to builders. This would eventually make the effective GST rate to 8% once the input cost of land is accounted for and reduced. It would bring it on par with the prevailing affordable housing GST tax rate.

The second proposal was for a flat 5% GST to be levied for under-construction properties without including the ITC benefit, provided the builder purchases at least 80% of the raw materials from GST-registered suppliers.

Finance minister Arun Jaitley had said that due to “divergence of opinion on real estate issues” a seven member Group of Ministers will be constituted to find “convergence”. This group will come up with recommendations which will be considered in the next GST Council meeting and the GoM was formed on Tuesday. Hence, the core issue or demand from the real estate as well as home buyers will not be addressed in Budget 2019. 

STORY SO FAR

2018

• 100% FDI permitted in real estate broking services 
   
• GST on affordable housing reduced to 8% from 12%

2017

• Real Estate (Regulation and Development) Act, 2016 gets implemented 
   
• Affordable housing gets infrastructure status

2016 

• Demonetisation affects home sales and project launches

2015 

• Pradhan Mantri Awas Yojana launched for affordable housing to the urban poor