To really spur real estate deals, ease SWAMIH norms

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January 09, 2021 6:00 AM

The Centre’s SWAMIH—Special Window for Affordable and Mid-Income Housing—scheme seems to have been hit by the lockdown and the slowdown in construction due to the labour shortage.

But, since many more projects need to be completed, the scheme could perhaps be tweaked to ease the norms to make more projects eligible for funding.But, since many more projects need to be completed, the scheme could perhaps be tweaked to ease the norms to make more projects eligible for funding. (Representative image)

Given how the real estate sector catalyses economic growth like no other, any incentives or sops that spur homes purchases are to be appreciated. Even a small cut in the stamp duty by the Maharashtra government helped boost property sales, though the bigger reason for the increase in transactions was clearly the fall in asset prices. Now, Maharashtra is understood to have approved a 50% cut in premiums for both ongoing and new projects that are taken up by December 31. If builders choose not to pass on the entire savings—typically 10-15% of the selling price—they will be able to earn better margins. If they do, however, sales volumes should improve meaningfully, and this should be incentive enough for them to move quickly on projects. To be sure, there could be some caveats, and the benefits may turn out to be smaller than they appear prima facie. For instance, builders may be asked to pay the premiums based on the Ready Reckoner (RR) rates of either 2019 or 2020, whichever is higher. They could also be asked to take care of the entire stamp duty so that homebuyers are spared. In fact, given there are several charges that need to be paid in addition to the premiums, the savings could be smaller. Nonetheless, even modest gains from the lower statutory fees should help keep the sales momentum intact and reduce inventory. The committee which recommended that premiums be pared also pointed out that, in Mumbai, these are paid under as many as 22 heads, including FSI, staircases, lift-wells and lobbies. The number of heads is fewer in Bengaluru, at ten, and in Delhi, at five.

Meanwhile, the Centre’s SWAMIH—Special Window for Affordable and Mid-Income Housing—scheme seems to have been hit by the lockdown and the slowdown in construction due to the labour shortage. With normalcy returning fast, quicker disbursements should be possible. Until early October, about Rs 4,200 crore worth of investments had been approved, of the roughly Rs 12,000 crore that had been sanctioned by the government-sponsored AIF created to assist stalled residential projects by extending last-mile funding. To be sure, the pace of disbursements could be gradual since these are calibrated to the progress of construction. But, since many more projects need to be completed, the scheme could perhaps be tweaked to ease the norms to make more projects eligible for funding.

The last few years have been a tough time for both buyers and sellers; while asset prices remained elevated, keeping homes out of the reach of buyers, a spate of regulation and formalisation in the form of RERA and GST hit builders. Now, the government could perhaps consider a higher exemption limit for the principal on home loans—to around Rs 3 lakh (outside of Section 80C) from the current Rs 1.5 lakh per annum. It could also provide a bigger break for the interest component on home loans, at about Rs 3 lakh from the current Rs 2 lakh. Given asset prices have trended down, those sitting on the fence might take the plunge. Rather than giving a general tax-break, a targeted sop for home purchases could be more effective. If the economics of highly-leveraged developers improve, they will be able to repay bank loans.

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