Budget 2016: The real estate sector continues to remain sensitive to government policies for growth. The sector is just emerging from a prolonged slowdown, and is looking for signs of light at the end of the tunnel. This makes Union Budget 2016 critical, and the real estate industry has many expectations from it. Prime Minister Narendra Modi led government has already taken several steps in the right moves creating the perfect atmosphere for the industry. It has already started work on developing smart cities, increase in foreign direct investment and “Housing for All-2022” that have boosted the sentiments of both buyers and developers. But we feel it’s right time that the sector gets industry status that has been a long pending demand of the real estate sector as developers can then avail finances at cheaper rates from financial institutions that will spur economic growth.
The sector should be accorded industry status allowing investments and funds at competitive rates to spur economic growth. Realty players have been asking for an industry status to be accorded to the sector, which will also help in sourcing financing. The sector also requires reduced cost of finance for both developers and buyers to make housing more affordable Discussions around the Real Estate Bill must reach a positive conclusion which will give home buyers the confidence to return to the market and deal with responsible builders. Furthermore, the implementation of GST bill will eliminate multiple levels of taxation and further reform the lengthy approval process that would facilitate speedy project execution.
The present limit on the principle and interest amount of home loan repayments for individual buyers should be enhanced too, as this will make it easier for people to purchase their dream homes. Clarity on the land acquisition policy holds the key to the development of realty and infrastructure sector. We also need REIT to finally kick off and for transactions to begin. On purchase into an under-construction property, buyers can only claim tax benefits of Rs. 2 lakh after possession if construction is completed within three years. The benefits reduce to Rs. 30,000 if the builder delays construction beyond this – and they pay higher interest. Instead of allowing home buyers tax benefits post-possession, the Union Budget should make a provision that allows these from the time they start paying interest on housing loans. This will ease their monetary burden considerably and make increase the velocity of home loan disbursements. Similarly, if an under-construction property is purchased from capital gains, its construction must be completed within three years of its sale to avail exemption.
There can be delays by developer in such cases too. These deductions should be brought at par and the construction timeline should be extended from the current three years to five years. Further, the government need to put in place the single window clearance for projects. While the demand for housing in metropolitan cities is only on the rise, and the industry is not able to bridge the gap between demand and supply quick enough as the already lengthy process of construction is further increased by the difficulty in obtaining permissions. Additional allocation of funds for infrastructure development will lead to affordable housing. With the government’s ‘House for All by 2022’, it is imperative to allot new land on the outskirts of metropolitan areas in order to promote affordable housing. We are optimistic that the upcoming budget will address key administrative, financial and tax reforms that will spur growth in the future
By Rohit Katyal, Founder Director, Capacit’e Infraprojects Limited