According to Sachin Sandhir, managing director, The Royal Institution of Chartered Surveyors (RICS) India, As indicated by Manmohan Singh and the President, the government would give a further push to public investments, especially in infrastructure, to propel economic growth. The housing ministry has already asked the finance ministry for fiscal concessions for building affordable houses. We hope the housing sector is given ample boost with tools such as a dedicated fund for affordable housing, reintroduction of concessions under Section 80IB (10), waiver or reduction in stamp duty, VAT and other government taxes for the EWS and restoration of tax holidays for low-cost housing projects.
Sandhir added, from the publics standpoint, an increase in the housing loan interest deduction limit from Rs 1.5 lakh to Rs 3 lakh per annum, increase in the limit of priority sector lending to Rs 30 or 35 lakh and reduction in interest rates, will all help address housing concerns. Further relaxation of ECB and FDI norms will also prove beneficial. We hope the government would avoid levying any fresh taxes which could adversely impact the real estate sector.
According to Niranjan Hiranandani, managing director, Hiranandani Constructions, It is necessary for the government to abolish fringe benefit tax, reduce central sales tax and bring in single unified goods and services tax (GST). Moreover, there should be reduction in corporate tax rate from the current rate of 33% to about 26%.
Apart from this, certain developers feel that an ordinance should be passed to abolish the service tax for rented property as tenancy by definition is a temporary transfer of ownership. Vikas Oberoi, managing director, Oberoi Constructions said, Measures such as lowering interest rates on home loans and reducing VAT will also enhance customer buying. Service tax (proposed increase from 10.32% to 12.36%) can prove as a deterrent for home buying. An ordinance should be passed to abolish service tax for rented property as tenancy by definition is a temporary transfer of ownership and is not a service provided by the owner of the property.
The need of the hour is to hold economy-reviving actions and address issues enhancing real estate spending where certain direct and indirect measures need to be taken up on priority. Dhaval Ajmera, director, Ajmera Realty and Infra India Ltd opines, We hope the government will accord industry status to real estate, which is pending since long. To improve buyers sentiment and to make EMIs affordable, home loan rates should be brought down 7% to 8%, with margin money not exceeding 15%.
Ajmera added that similarly, to help developers to cut down the cost, the lending rate for construction finance should be around 10%. Looking at the high cost in metro cities, the limit of priority sector lending should be enhanced from Rs 20 lakh to Rs 40 lakh. The income tax deduction on interest paid on housing loan should also be enhanced from Rs 1.5 lakh to Rs 3 lakh. Real estate should be treated at par with any other industry for risk coverage ratio while lending. We also expect the government to declare a special package for affordable housing to overcome about 23 mn urban housing requirements, he added.
Undeniably, relaxation of a few norms by the banks can vastly accelerate the growth of the real estate sector. Project financing measures need to be restructured by lowering the interest rate and leveraging the foreign exchange reserves. Moreover, relaxing the excise duty and re-introducing Sec 80 IB need to be considered.
All said and done, certain industry experts feel that the government is already on the right track by considering the hiking of income-tax exemption available for interest payment on home loans to Rs 2.5 lakh a year. However, there are still a number of blanks to be filled.
Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj (JLLM) too agrees that the budget should make high-priority provisions for the laying down of necessary infrastructure so that new areas can be opened up. The concept would be to create and link up satellite settlements to main cities that will help tackle the demand-supply mismatch. He said, The budget should provide forward momentum for REMFs so that real estate becomes accessible to retail investors, as well. The budget should free the rental income yielded by commercial premises from service tax. The budget should finally and decisively enable the entry of FDI into the real estate sector.