Union Budget 2019 India: With the new government taking charge of the economy, the Union budget must enforce the same drive and focus on necessary measures to improve employment, housing, real estate and SMEs among other sectors. The housing sector requires urgent provisions and solutions for the declining confidence in the markets, better liquidity management, securitization, tax reconstruction, etc. Considering all the volatilities, below are the expectations form India’s first female FM in decades –
I. The primary focus should be liquidity management of HFCs and NBFCs, especially of the smaller ones, which are dependent on the banking system. Insolvency and liquidity are two problems which require separate solutions.
Liquidity crunch tremendously affected the GDP growth and employment in the past nine months. To control further damage, RBI must enforce suitable regulatory measures like Asset-liability Management, Leverage, Risk Management, etc., and stabilize the situation by facilitating liquidity to NBFCs and HFCs to service the low-income sector. Additionally, the well-functioning HFCs and NBFCs must start receiving funds by the banks as they were, before September 2018. The government along with RBI needs to address the lack of confidence and must intervene to regain momentum as it is utterly crucial for economic growth, GDP, employment, housing, real estate, SMEs and various other sectors.
II. Securitization of loan pool to banks was a great relief during the crisis. To maintain this, regularisation of fresh funds is required to create a fresh book for on-going securitization. RBI should finalize the securitization guidelines on priority to make it easy, secure and beneficial.
III. The ‘A+’ rated NBFCs and HFCs should be encouraged to issue public bonds for diversification of resources. The current terms and conditions of providing 25% redemption reserve on public issuance of bonds could be reduced to 15% and mandate to keep sufficient reserve equal to one year’s interest liability on public bonds.
IV. In 2018, the affordable housing fund limit with National Housing Bank was increased from Rs 24000 cr to Rs 30,000 cr by the government to refinance to HFCs. This year, the funding limit must be increased to Rs 60000 cr to provide refinance to HFCs for housing loans up to 15 lacs in order to give a push to home loans to EWS and LIG segments. At least 25% of the annual disbursements needs from this fund should be made available to NBFCs. NHB’s current process of releasing refinance should be simplified and predictable, with required checks and measures.
V. Exempt doubtful and loss assets from income tax with some ceilings.
VI. Existing Income tax exemption limit of 2 lacs on interest on home loans be increased to Rs 3 lakhs.
VII. Increase annual income tax exemption limit to 6 lacs to align with the annual income ceiling of 6 lacs for the low-income group.
VIII. One-time measures like special restructuring scheme like MSME should be allowed for the restructuring of all developer loans which have come into distress due to squeeze in liquidity caused by slowing of home loan disbursement and stoppage of fresh loan for construction by NBFCs.
IX. GST must include stamp duty for registration of property with of 1% for affordable housing, say for property value of Rs 15 – 20 lakh.
X. Housing and Employment – In most cities, especially in metros, a large chunk of the population is engaged in the informal sector in different income generating activities. The state governments or municipalities have not been able to accommodate sufficient sitting places in every residential or office locality for micro business or hawkers etc. This leads them to occupy unauthorized places wherever available at the mercy of police and municipal inspectors only to remain in constant threat. Although, if enough hawking areas are carved out, massive employment can be generated in every city which in turn will not only save small business persons from daily tiffs with the law enforcement, but also help office workers, low and middle-class residents of the area, to buy food and other daily necessities’ at affordable rates on their doorstep. This will be beneficial for municipal corporations as well as the government to generate huge income by formalizing business places for the low-income population who are otherwise struggling to make ends meet and pay money to stay in business in a constant state of uncertainty.
XI. Introduction of concepts like apprenticeship could be potential instant relief from unemployment in the country. All listed and unlisted companies employing 100 or more people must take unemployed youth as apprentices for at least a year. Intake for the same should be a minimum of 10% of the total workforce of the company. Apprenticeship allowance to be decided as 20% or more than the applicable minimum wages of the respective states. This activity could also be included in the list of CSR initiatives under the company law. Companies that do not qualify to create CSR fund should be allowed tax exemptions on the apprenticeship allowance amount paid.
XII. Under Skill Development, companies should be allowed to recruit unemployed youth to give them 2-3 months training through accredited skill development-training partners on customized curriculum and then employ them as a trainee. The skill development training expenses for 2-3 months and four months on-the-job training salary could be spent from the CSR funds, and if CSR is not applicable, then tax exemption be allowed.
(By Deo Shankar Tripathi, MD & CEO of Aadhar Housing Finance)