Exactly one week from now, the Modi government will place its first, full-year Union Budget in Parliament. According to experts and captains of the real estate sector, who are optimistic that the B-Day will unravel some big-bang reforms. Expecting businessmen, Indian or foreign, or expecting investors, Indian or foreign, to invest money and effort for the noble cause of nation building will be a non-starter. So, what should the Modi Budget bring to the table on February 28?
Stakeholders in the real estate sector are unanimous that the whole system of doing business in India must be overhauled, especially as the Narendra Modi government was voted in last May riding on high expectations and the euphoria of development.
Navin Raheja, chairman of Naredco and CMD of Raheja Group, said that the government must introduce measures which would lead to lowering of construction cost and reduce delivery time. He also spoke for reintroducing Section 80-IA of the Income Tax Act, which provides a deduction of 100% of the profits derived from an infrastructure company. Raheja said that the definition of an infrastructure facility must encompass "an integrated town ship and group-housing development on more than 10 acres with residential, educational, medical, community, institutional or commercial buildings, and creation of the required facilities including roads, water supply, water treatment, sanitation, sewerage systems and solid waste treatment and management systems".
This would help serious developers claim the benefits from tax concessions, Raheja said.
Getamber Anand, president (elect) of Credai and CMD of ATS Group, says: “We expect the finance minister to look at rationalizing the taxes on housing because, today, a customer pays more than Rs 350 per sq ft on account of various taxes when he buys a house anywhere in the country. Apart from this, the Union government must focus upon stock generation of affordable housing, not merely in the metros, but also in Tier II and III towns and put in place the right incentives so that developers of the private sector are motivated to go to these locations and raise projects.“ Industry captains, bankers, experts, and other stakeholders of the sector have very few demands. In fact, none at all! All that they want from the Budget is the policy measures, on paper, which are necessary to make Prime Minister Narendra Modi's stated electoral promises during the 2014 general election a reality.
PM Modi promised to do away with red tape and corruption, ensure speedy approvals, put in place a policy-driven administration, development, and growth.
And, to achieve growth, the industry, naturally, would expect a single-window clearance system, online clearances in order to expedite projects and bring in transparency, and industry status for the sector to help procure easy and adequate funds.
Prime Minister Narendra Modi's vision of “Housing for all by 2022“ cannot be achieved without the active participation of the private sector, so the quantum and quality of incentives to developers ready to take up large-scale affordable housing projects must be attractive, at the least.
Navin Raheja, chairman of Naredco and CMD of Raheja Group, said that builders have pinned great hopes upon NDA government to put development of real estate sector on fast track, which would not only provide impetus to economic growth, but also create lakhs of new jobs, overall, in the country.
In a statement National real estate development council, (Naredco) suggested that, deduction of up to 100% of profit earned was available under Section 80-IB (10) to firms developing housing projects on plots of minimum area of 1 acre and size of units with maximum built-up area of 1,000 sq ft in cities of Delhi or Mumbai or within 25 km from municipal limits of these cities and 1,500 sq ft at any other place. This was available for projects approved on or before March 31, 2008.
As the date has not been extended, deduction available under this section ceased thereafter.
Since there is huge demand for affordable housing of up to 60 sq metres carpet area and there is a commitment from the government to provide housing to all by 2022, Naredco suggest ed that provisions of Section 80-IB(10) be revived in the same existing format and project funding for the sector be treated as “priority lending“ by banks and financial institutions.
Housing unit size could be restricted to 60 sq metres carpet area as per the definition of affordable housing accepted by the government. This is one of the significant provisions which will incentivize private sector developers to construct to smaller housing units. In order to increase the affordability of buyers Raheja, along with Naredco, suggested an increase in deduction on account of interest payment to the extent of full interest paid, at least in respect of one house.
Deepak Kapur, director of Gulshan Homz, says: “We have been crying hoarse for infrastructure status to the sector, for improving FDI inflows, access to external commercial borrowings (ECB), and making domestic institutional borrowings easy for the sector. We sincerely believe the new government will incorporate these policies in the Budget.“
Manish Agarwal, MD of Satya Group and secretary of Credai-NCR, says: “The real estate market in India has been largely unorganized in terms of its processes and integral legal systems. The real estate bill is the need of the hour. This would bring in transparency into the system, provide assistance in FDI, and wipe out difficulties in raising capital from banks and other financial institutions.“
Rajesh Goyal, MD of RG Group, says: "The effect on repo rate was gifted to the economy last month. We hope it is unchanged this time. A reduction in SLR is good news for banks and borrowers, as any reduction in SLR allows a greater space for banks to lend more, which is important for liquidity and cash flow in the economy."
RIGHT TURN: Stakeholders are unanimous that the whole system of doing business in India must be overhauled, especially as Modi was voted in last May riding on the euphoria of development.