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Pre Budget expectations from real estate experts

Pre Budget expectations from real estate experts

Mr. Navin Makhija, Managing Director, The Wadhwa Group

To mitigate COVID-19 disruptions, the Government has shown adequate support by bringing in reforms in policies and announced some slew of relief measures to revive the economy. The reduction in stamp duty before the festive season by the State Government was a very important move which gave a much needed boost to the sector. The world resurrecting to the pandemic of Covid-19 has learnt the value of healthy living as customers too realized the importance of a well planned, well designed and a well ventilated home more than ever before. We immediately saw sales volumes coming back to normal due to a boost in the consumer sentiments on the back of all time low home loan interest rates, good festive offers, relaxation in GST and reduced stamp duty. These factors helped drive demand and boosted sales and were also the key in ridding the sector of the ills caused by the virus. Now with the vaccination drive going in full swing, a lot is expected from the upcoming budget that will give a further boost to revive the economy.

The forthcoming budget will be crucial in terms of Government reforms and we believe that the Government will take appropriate measures to spur consumer demand. With the pandemic’s impact still remaining far in the horizon, abundant policy support is still needed for the real estate sector’s bounce and we are hoping that the upcoming budget will emphasize that.

More tax sops and higher relief on the home loan rates will woo the homebuyers and investors to buy property. Additionally, interest rates on housing loans should be reduced to benefit a broader segment of homebuyers, including the first-time buyers. Also, the income tax benefit for housing should not only be for residential purchasers alone rather it should also be extended towards commercial purchasers as well. This can help the sector recover from its liquidity woes to a larger extent. We would also like to revive the input tax credit under the GST reforms which will help to keep the property prices under control.

The capping of Rs 45 lakh applicable for an affordable house should be extended to 60 lakhs. This would expand the benefits of affordable housing scheme to more homes and therefore boost the end-user demand. While incentives have been provided to boost the affordable housing segment, there needs to be a reduction in the cost of land, development premiums to incentivize developers to build budget homes. Since the high cost of land is another major constraint faced by the sector, steps taken by the government to unlock the value of land parcels held by government agencies / PSUs through partnerships with affordable housing developers can be a significant step. Such initiatives can also help the government to improve its revenue generation capability. The Government also needs to allocate more funds for Pradhan Mantri Awas Yojana (PMAY) which will help them achieve the target of ‘Housing for All by 2022’.

Timely start & completion of projects has always been a concern, and a single window clearance will help to swiftly execute projects making it a win-win situation for developers and homebuyers. The real estate sector has a significant direct contribution of around 6-7 to percent of the GDP. Therefore, it is utmost important that the sector should be accorded with the industry status. Industry status for the sector and single window clearance for projects has been a long-standing demand which we expect the Government to address.

Apart from this, we are expecting a more determined infrastructure push from the Government not only in the form of more funds but with strict guidelines on actual infra deployment. This will certainly boost the real estate sector and also generate more jobs that the Government had committed to deploy.

We anticipate the Government to announce incentives that will propel the growth of the sector such as introducing tax breaks which will increase public spending, less transaction cost, etc.

Sudarshan Lodha, Co-founder, Strata —

“Considering the real estate sector is the second-largest employer in the country and directly or indirectly, accounts for approx.10 percent of the GDP, it deserves serious attention in the upcoming budget. Within realty the commercial real-estate has been a watch-out sector for investors both overseas and back home owing to its strong fundamentals and resilience. The government should therefore consider measures to further encourage more NRI investments in the country. For instance considering a reduction in the income earned from long-term capital gains would be helpful.

Owing to fractional platforms, affordable commercial realty is now a reality in India and therefore for retail investors intending to invest in commercial assets, the government should consider a higher exemption limit. Alternatively since both the interest income as well as dividend earned by investors are taxable as per their slab rates, the government should consider a waiver of tax on dividend. These measures will help boost retail sale which in turn can offer a huge impetus to trade and economic activities. Considering personal loan is expensive, the government should also bring in a policy whereby retail investors can avail a loan seamlessly from banks at a reasonable interest rate for investment in commercial assets through fractional route.

Besides it is important to address investor sentiments while also addressing the challenges being faced by developers. For instance considering a stress fund can help generate cash flow for developers thereby helping build the supply side of the industry.  Alternatively encouraging banks and NBFCs’ to lend to commercial real-estate projects or take over and restructure stalled projects will also go a long way in kick-starting the economy. Similarly properties that are not sold but developed for leasing, GST at 18 percent should be reconsidered as it is a huge liability for the developers as it pushes the cost of construction and poses further challenges in the wake of a liquidity crunch.

Additionally, the Government should also consider incentivising alternative asset classes such as warehousing, SEZs’, data canters and co-working spaces to build momentum on both the demand and supply side.”

Mr. Nilesh Shah, Chairman and MD, Atlas Integrated Finance Ltd

With the disastrous effects that Covid19 had on everyone`s lives, businesses and the Indian economy, the expectations from the upcoming Union Budget 2021 is sky high. The unemployment rate though has come down from 23.52% in April 2020 to 9.06% in Dec 2020, is still on the higher side.

 As per the latest report by McKinsey by 2030, India needs to generate 90 million non-farming jobs over the next decade (this is not accounting for 55 million women who might join the workforce,) which is possible is the GDP growth remains consistently above 8%. This year GDP growth has been just 4%.

“At Atlas Integrated Finance Ltd, we have identified some sectors which can help India solve its falling GDP and unemployment problem, if those sectors get the necessary support from the government in this Budget. We think the necessary exemptions in the below sectors will pave the path for a resounding growth of the economy”

The Housing Sector : Housing is a sector that helps in creation of both direct jobs (construction workers, carpenters, plumbers, engineers etc.) and indirect jobs (in cement, steel, paint, power and many of the ancillary industries associated with housing.) in India. There is a large level of unsold inventory in cities like Mumbai, Delhi NCR region, Bangalore, Pune, Chennai etc. As per section 24 of the Income tax Act 1961 an assesse is eligible for interest deduction of only Rs.2 lacs on the interest paid on housing loans. An increase in this ceiling limit should incentivise home buyers. This coupled with the reduction of stamp duty charges below 5% can give a boost to the housing demand and lead to record high registrations as seen in Maharashtra as on Dec 2020.

The Automobile Industry: The automobile sector has witnessed seen a lot of problems due to reduction in demand, cost increase due to regulatory changes due to emission and safety norms ,insurance, premium for five years and road tax registration increase have led to almost 30 to 40% price increase in the various automotive segments. Some of the steps like reduction of the GST tax rates to 18%, introduction of the incentive based vehicle scrappage policy to scrap over 15-year-old commercial vehicles, local sourcing of automobile parts and EV incentives for electric vehicle buyers are some of the triggers for boost in the demand in this sectors.

The Travel and Tourism Industry: There have hardly been any positive announcements or stimulus announced by the government to support the travel and tourism space that was beaten down due to the pandemic outbreak. The sector needs a revival plan starting with a reduction in GST to 5%, infrastructural developments, creation of tourism sites into world class tourist destinations, along with easing the visa approval process.

Sanjay Bhatia, Co-Founder, Freightwalla

In the year 2020, the pandemic brought global industries to their knees. The USD 160 billion Indian logistics industry was also not spared as it came to a standstill during the pandemic lockdown.  The industry faced many challenges in terms of clearance, processing, and movement of shipments. Few technology-driven businesses managed to overcome some of the EXIM industry’s challenges during the pandemic. The stumbling-blocks faced by the exporters and importers could have been avoided if the entire ecosystem was working digitally. There is a pressing need for a complete digital transformation of the industry to handle international shipments efficiently. Consider the case of customs that have taken part in their processes online. There are still many things that need to be re-moulded with advanced technologies. We hope the union budget to announce suitable investments towards the digitization of the shipping and logistics sector. A leap towards the initiative will bring in transparency, reduction in cost, and better cost management. Digitization should also include implementing smart single-window clearance for smooth processing of shipments or approvals. Such initiatives will prepare us to tackle any untoward incidences in the future, like the current pandemic. Investments in Artificial Intelligence, Machine Learning, and BlockChain technologies can facilitate complete transformation. It can boost productivity in every sector, and style pretty effective and successful workflow.

Further, the Union Cabinet recently approved a multimodal logistics hub proposal and set up industrial corridor nodes at Krishnapatnam and Tumakuru. We hope to see implementations of these at the earliest. It will facilitate the transportation of goods, thereby cutting travel time and making the system more efficient.

There is also an expectation that the proposed National Logistics Policy may get announced during the announcement of union budget 2021. We are optimistic that that will improve productivity and reduce logistics costs.

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