The real estate industry, just about recovering from the recession, has a long wish list. As Mayur Shah, MD, Marathon group, points out, the realty sector was the worst hit during the downturn and is recovering slowly as compared to the others. Shah is hoping the Budget will help recovery.
"We are expecting measures such as extensions of incentive for affordable housing, forward momentum and providing a mechanism for taxation of Real Estate Mutual Funds," he says. He believes that a comprehensive increase in available deductions for interest on housing loan must be revised on priority levels and a tax holiday under Section 80-IB for affordable housing units below 1200 sq. ft. and incentives to invest in rental housing schemes should be provided. These are all the main planks of developer woes, post recession.
Infrastructure is another key area for stimulus. As Abhisheck Lodha, MD, Lodha Developers suggests, infrastructure should be built in a way that creates and links satellite settlements to cities. "This will tackle the demandsupply mismatch," he says. He also adds that the budget should offer clarity on the introduction of a real estate regulator, since this would result in higher levels of transparency. "This regulator may not necessarily decide on rates, but should put down firm principles in terms of property dealings and also quality parameters in terms of rating of constructions," he explains.
Another important issue is liquidity in the system. Flexibility in FDI norms and forward momentum for REMFs to address the issue of capital funding requirements for high-end projects is crucial, as Lodha puts it.
From the buyer point of view, international property analysts Knight Frank state that an increase in income tax deduction on home loan interest u/s 24 (b) would come as a boon, as a large section of residential buyers purchase property by assistance from financial institutions and over 80% of the housing requirement comes from the lower and middle income segment.
Assuming an interest rate of 10% pa on a home loan, the current deduction benefits house buyers of up to Rs.15,00,000. However, the property value in cities is much larger than this amount. Therefore, an upward revision of this limit from Rs.1,50,000 to at least Rs. 3,00,000 has merit. Also an increase in income tax deduction on home loan principal repayment u/s 80 C to the extent of Rs.1,00,000 is available for home loan principal repayment. Various other investment avenues like PF, insurance, mutual fund, etc. are part of this section and therefore the share of benefit available to home loan buyers is insignificant. A separate deduction to the tune of Rs.1,00,000 should be provided for the housing loan repayment or the overall 80 C deduction should be increased to Rs.2,00,000.
The view that it is too soon to stop the sector stimulus measures is unanimous. Milan Kothary, Director, GVA Intercapitalis, feels the recession is not completely over. He says, "This is just a bulge in the economy - not a guarantee of good times. The budget might give us different news, as some impetus to the growth of the economy is needed. Incentives are desperately needed to instill life in the economy."
Rajnikant S Ajmera, MD, Ajmera Realty & Infra India Ltd. and Past President, CREDAI, feels that the economy is slowly recovering and still is a very critical stage. An early withdrawal of the stimulus package may backfire. "Government should levy export duty on construction steel and cement to discourage exports," he says.
Underlining this, Sachin Sandhir, MD and Country Head, Royal Institution of Chartered Surveyors (RICS) India said, "In India, timing and magnitude of the exit from policy stimulus measures are crucial for the sustainability of recovery in property and land markets. With further tightening of the monetary policy expected during the course of 2010, policy reforms and measures expected from the budget are crucial to the success of realty markets."
Mr. Santosh Rungta, President, CREDAI, commented, "The thrust of our recommendations have been "Affordable Housing" - beneficial to both home buyers as well as developers. Amendments in the Income Tax Act on income from other sources, extension on limit of deduction for repayment of principal amount of a home loan, tax benefits on slum redevelopment projects and external commercial borrowings in real estate will be of considerable help to buyers and also help in developing the sector subsequently. These incentives shall increase the supply of housing at affordable prices."
It is an incontrovertible truth that the real estate industry contributes significantly to the country's GDP, provided the sector is supported by favourable policies from the government and is the second largest employer in India, providing employment to almost 20 million people and supporting more than 250 affiliate industries, so the importance of giving an impetus to this sector is crucial!
