Motilal Oswal: Realty sector bets on government steps to resolve problems

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Published: August 31, 2019 3:12:49 AM

As far as the real estate sector is concerned, the FM had met key stakeholders such as developers, home buyers and lenders on 11th Aug’19. In this note, we highlight the key wish list put forth by the sector.

Motilal Oswal, Realty sector, Nirmala Sitharaman, Reserve Bank of India, Bimal Jalan Committee, Bimal Jalan CommitteeThe FM in her press conference had mentioned that she met various industry participants to assimilate their suggestions, affirming the government’s intention to understand sector-specific issues and attempt to resolve them.

Finance minister Nirmala Sitharaman last week announced a slew of measures to deal with pressures facing various sectors. This was followed by the Reserve Bank of India (RBI) accepting the recommendations of the Bimal Jalan Committee to transfer funds to the government.

This, in our view, will serve well to boost sentiment across industries after months of anxiety. The FM in her press conference had mentioned that she met various industry participants to assimilate their suggestions, affirming the government’s intention to understand sector-specific issues and attempt to resolve them.

As far as the real estate sector is concerned, the FM had met key stakeholders such as developers, home buyers and lenders on 11th Aug’19. In this note, we highlight the key wish list put forth by the sector.

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Increase/removal of tickets size cap of Rs 4.5 m in affordable housing (AFH) to be eligible for corporate tax exemption to developers and benefits to buyers. As per our interaction with key developers, the applicability of cap has made AFH projects unviable in metro cities as the land cost is high.

According to industry sources, 200+ projects (encompassing ~1.74 lakh homes) across top seven cities in India are completely stalled, either due to liquidity concerns or litigations. Overall value of these projects is pegged at Rs 1.8 lakh crore. The recent circular by the NHB prohibiting interest subvention for housing loan needs to be reviewed, according to the stakeholders.

Some of the demands in this regard were loan up to `10 m be counted towards priority sector, direct subsidy of minimum 5% in interest rates to be provided to first-time buyers and interest paid on home loans to be fully exempted from taxable income.

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