Budget 2020: From a real estate industry perspective, developers expect the FM to address some of the issues confronting the government.
Budget 2020 Expectations: The Budget for 2020-21 is going to be the first full-fledged budget of Modi 2.0 and it will be presented at a time when the Indian growth story is facing headwinds with the Q2 GDP plummeting to 4.5%. The tax collection and revenue growth have also been below expectations.
Accordingly, every step or the measure that Hon’ble Finance Minister announces on the floor of the house on February 1 will be keenly watched and scrutinised. From a real estate industry perspective, which remains an important element in the entire ecosystem, we expect the Hon’ble FM to address the following issues confronting the government:
1. Measures to Tackle Approvals and Procedural difficulties: To increase the efficiency and timeliness of the project, a single window clearance mechanism is prerequisite for the growth of the industry which will benefit developers as well as end consumers. In the budget 2019, it is expected that the government will make provisions to resolve the issues in clearance and approval process for residential projects which will also help the government in achieving the aim of Housing for All by 2022.
2. Rationalise Taxes: Rationalization of taxes would be the one most important factor that the real estate industry would expect at this point of time from the upcoming Budget. Pragmatic steps should be taken to provide clarity and transparency on input tax credit which will be a major factor that will decide housing prices in 2019.
3. Exemption limit on Interest on Home loan: To support millions of first time buyers across the nation, the government should increase the limit of tax deduction for housing loans up to Rs 5 lakh from the present limit of Rs 2 lakh per annum. A similar limit should also be set for the principal loan repayment from Rs 1 lakh at present.
4. Industry status to real estate sector: This is also a longstanding demand which has so far gone unmet. As real estate is emerging as one of the top job creating sectors, extending industry status will fuel the growth of realty and eventually will help in generating employment across various sectors which are directly or indirectly related to it. This will definitely help the reality sector to enhance its contribution to the country’s GDP.
5. Affordable and Easy Accessible Finance: We feel that one of the biggest barriers in achieving the Housing for All 2022 and Affordable Housing across the country is non-availability of access to easy and affordable finances. In the end the high interest rates incurred on building real estate projects finally get transferred to the end the consumers. Hence we feel that it’s extremely important that the real estate industry should be given access to mainstream Nationalised Banks and NBFCs to incur finance for home building process across the nation.
6. Restructuring the terms of old defaulted loans: Even though the Finance Minster had recently created a special booster package for the realty sector, of Rs 25,000 crore alternative investment fund (AIF), aimed at providing relief to developers with unfinished projects to ensure delivery of homes to buyers, we feel that restructuring the terms of interest and instalments of old loans given to the developers will help them to finish and deliver the projects to home buyers and at the same time will also help them to pay back the money to banks and financial instituations.
To meet the rising demand for housing, developers are initiating new projects but construction of these new projects will contribute towards India’s deteriorating urban environment. Marginally higher cost of construction of green buildings has kept a majority of developers away from investing in green buildings. Hence, it is expected that the government will encourage developers with higher incentives in terms of FSI and/or some degree of tax exemption to encourage them to adopt green building technologies.
(By Amit Modi, Director, ABA Corp, and President (elect), CREDAI Western UP)