Budget 2020-21: HFCs are an important player in the financial system because of their role in providing access to Housing finance to various sections of the society.
- By Anil Kaul
Budget 2020 India: HFCs are an important player in the financial system because of their role in providing access to Housing finance to various sections of the society. We look forward to the upcoming budget to help create more avenues for accelerated growth and sustainability of Housing Finance Industry. We hope the upcoming budget helps us in the following way: Enable HFCs to diversify the borrowing profile: Allow HFCs/ NBFCs which are well capitalized, with a good track record, strong ratings, reputed parentage to access public deposits. This will significantly reduce risk by enabling access to large and long term stable funding sources, thereby improving diversity in the borrowing portfolio of the lender.
Fuel growth through tax rebates: An increase in the tax rebate for housing loan interest is the need of the hour. A hike from the existing Rs 2,00,000 will encourage more salaried / small entrepreneurs to invest in a house thus helping in build in demand for homes. Similarly, the last personal tax relief in the form of deduction under section 80 C was in 2014, this much needed increase will also uplift the sentiment of the consumers towards buying their own home .
Include ITC benefit in GST for under-construction homes — While the GST rate on under-construction properties was reduced to 5 per cent in 2019, the previous ITC benefit was shelved. Providing ITC benefits to developers is a great incentive to reduce property prices and thus, make under-construction homes attractive again. This will in turn revive demand for housing sector.
Revive projects: There are several real estate projects that are either delayed or just stalled. Timely intervention towards last mile funding or for reviving projects with cash flow mismatches will kickstart the sector.. We hope the Budget helps by offering structured financial solutions to get these projects up and running. This will help in energizing velocity of the business cycle. Real estate is a significant contributor to the economy (contributes roughly 8 % to the GDP) and growth in this sector will lead to more job creation and allied industries such as steel and cement can also benefit.
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HFCs/NBFCs notified under SARFAEI should also be notified under DRT: This will enable HFCs/NBFCs to recover losses on sale amount or on file action in DRT pertaining to cases where security is either under dispute or are incomplete
Create a central portal for all property records: A central repository should be created and maintained for all property details and transactions. This should be easily accessible by members of the public which can serve as the source of all information relating to the property. This is will reduce fraudulent property transactions including availed by forging property documents. Information with respect to new sanctions/ approvals given by town planning/other authorities for all new/pending housing projects can also be included in such portal. This information will help Banks and FIs in property diligence before lending.
(The author is Managing Director at Tata Capital Housing Finance Ltd. The views expressed are the author’s own)