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What Real Estate Expects From The Union Budget 2019

The real estate sector's major problem revolves around two basic issues, i.e. decreasing sales and unavailability of funds.

Investment-destination (1)

Ms. Nirmala Sitharaman, the new finance minister in Modi Government is set to present her maiden budget on July 5, 2019. And clearly, her focus would be to pull up the GDP growth rate up to 7.5%, as expected by the World Bank. Generating employment is the next issue that the government wants to tackle. And to do so, she would have to bring in some reformatory and corrective measures to the Housing, Agriculture and the Infrastructure sectors.

The housing sector, in particular, holds the key. There are expectations that the Modi government would continue its reformatory mode to bail out the ‘long-forgotten’ sector. During its first term, the Modi government had introduced major reforms such as Real Estate (Regulation and Development) Act, Goods and Services Tax (GST), Insolvency and Bankruptcy Code and Benami Transactions (Prohibition) Act. These reforms helped boost transparency into the sector, thereby, encouraging buyers’ sentiments.

This time, the sector expects more tax incentives to boost sales. No doubt, the transparency has improved but that could not convert into the sales, substantially. The developers also want easy availability of funds to keep up the operational activities.  Dr. Niranjan Hiranandani, President, NAREDCO, says, “Expectations from industry stakeholders revolve priorly around redressing liquidity crunch- an oil of India’s growth engine. The choking of liquidity is taking a toll on the health of companies and further inflicting financial damage. Quick corrective steps should be undertaken by apex bodies and government to pump in enough liquidity in the system to bring economic growth on track”.

Due to not recognized as an industry, the developers find it difficult to borrow funds from the regularized lenders. Also, the rate of interest is very high. The non-financial banking companies (NBFC) were one of the prime source of funds for the developers, However, the recent crisis at IL&FS further squeezed this option too.

Among the other expectations, the two major steps that the real estate sector wants the government to take is to relax the funding norms, and extend the tax exemptions, both under GST as well as Income Tax. Mr. Vikas Oberoi, CMD, Oberoi Realty, says, “As the nation undergoes rapid urbanization, it is imperative for the government to focus on the liquidity crunch, land availability, rationalization of GST with input tax credit benefit and more tax exemptions for the salaried class in the forthcoming budget”.

Mr. Anshuman Magazine, Chairman & CEO – India, South East Asia, Middle East & Africa, CBRE, also feels the same. He says, “For the creation of large-scale housing developments, tax benefits under Section 80-IA and Section 35AD (deductions to encourage private sector participation within the infrastructure sector) should be extended to integrated township projects by including the same within the definition of infrastructure facility. This would not only bring in the much-needed housing and infrastructural progression in these areas but will also help to generate employment.”

The issue of stuck projects is also one of the major areas the sector wants governments intervention. It is the homebuyers who actually face the heat when a project gets stuck. To solve this issue, the Forum for People’s Collective Efforts (FPCE), an independent body of homebuyers, proposes to create a “stress fund” to the tune of at least Rs 10,000 crore to complete stuck real estate projects across the country. The objective would be to complete all pending real estate projects within a span of 5 years by continuously providing for such a stress fund during that period. FPCE, subsequently, suggests forming a similar clause in RERA as well to counter this issue on an ongoing basis.

Overall, the real estate sector’s major problem revolves around two basic issues, i.e. decreasing sales and unavailability of funds. If the government is able to solve these two issues, the sector, being one of the largest contributors to the GDP and one of the largest employment generator, would enable the government to achieve its fiscal targets easily.

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