Jan 2020
23

Expectations from the Union Budget 2020 for Real Estate in India

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“The real estate sector is expecting demand-generating measures from the upcoming Union Budget. Reduction in personal income tax  and removal of tax surcharges for purchasing homes will have a positive impact on the sector. Lowering of personal income tax will increase disposable income for homebuyers. Hiking the 2 lakh tax rebate on housing loan interest rates can boost demand for housing, especially in the affordable and mid-segment categories. The granting of infrastructure status to the entire real estate sector would also enable the industry positively. It will bring large scale employment opportunities, create a strong financing pool for developers at lower interest rates and also make projects more affordable for buyers. Additionally GST rationalization for raw materials as well as single window clearance for processes and approvals are critical for the growth of the sector. The government had recently announced Alternative Investment Funds which is a welcome move as it will help in pushing the needle for stalled projects and restoring the buyer sentiment in the market. The budget should look at measures to successfully implement these funds.”  - Mr. Rakesh Reddy, Director, Aparna Constructions & Estates Pvt. Ltd.

“Co-living market size across India’s top 30 cities is expected to grow more than double by 2025 to $13.92 billion from current $ 6.67 billion. In the coming year we will see this sector growing in terms of innovation and offerings. The business fraternity is expecting more focus on the housing sector in the union budget 2020-2021. Rental housing and emerging segments like co-living has often not received proper attention in previous budgets. By giving taxation benefits, easy funding processes, availability of lower interest rates for loans and policies aimed at the growth of rental housing, can boost the segment and contribute to housing for all by 2022. The existing housing infrastructure in the metros is grossly inadequate to meet the increasing demand triggered by the massive migration of educated youth from tier-II and III cities for higher education and livelihood.  In order to address this problem the government shall also take steps to utilize the unsold inventory in favour of the migrant population which makes a huge chunk of today’s workforce.” Mr Pramod Kumar, Director, Guesture.

“While there are numerous expectations from the upcoming Union Budget 2020, there are a few which we as an industry hope materialises. To bring back growth in the real estate sector, being one of the major contributors to country’s GDP and a major job creator would be one of the focus areas in budget considerations. 

Firstly, the government should take more developer and investor-friendly initiatives for the betterment of the real estate market, predominantly for the mid-segment housing. Secondly, the government needs to ensure liquidity for the real estate developers. The real estate stress fund from the government is certainly a big boost. However, it would help only the stalled projects, the rest could only be addressed by the banks and NBFC's.

To ease the liquidity crunch and improve the cash flow in the commercial real estate front, the 18% GST for the properties that are not sold but developed for leasing, should be ideally removed or adequately addressed.  

We are also expecting a single-window clearance mechanism which has been a long-pending demand from the sector, which will greatly reduce the project timelines for developers. The sector expects the Budget 2020 to announce industry status to the real estate sector that will further help in raising low-cost funds and make land acquisition simpler..” - Mr. Madhusudhan G., Chairman and MD, Sumadhura Group.

“Last year, Modi 2.0 was extremely supportive of the real estate sector and the budget was instrumental in introducing various schemes, policies and guidelines which were beneficial for both developers and consumers whether it was rate cut of housing interest, NHB guidelines or affordable housing schemes. 

The primary concern that needs to be addressed is the significant funding crisis. The budget should ease norms to ensure steady flow of investments. Although benefits for affordable housing have been provided, developers are unable to receive funding from major banks and NBFCs at lower interest rates. 

As we are aware, due to lending market being cautious, mainly NBFC sector and banks, purchase of land has become very difficult since the last one and half years. The Real Estate developer can still use an alternate source of acquisition of property which is Joint Development Arrangement with the landlord to avoid large capital commitment. But due to lack of clarity on GST, even this alternative source has been totally ineffective and causing huge delay in proper supply of land for developers to carry out the development work. Thus, the impact on other industry employment will also be required to be kept in mind. Hence, few changes in GST can provide a huge positive impact in the Real Estate Industry for all sectors i.e., Residential, Commercial, Retail, IT Offices, Affordable Housing, Ware Housing, etc., 

  1. Waiver on Applicability on GST (if intended to be applicable) on Transfer Development Right (T.D.R.) on Joint Development Arrangement.
  2. Allowing of Input of Commercial GST during construction period against the rent receivables.  

Both of the above changes in the nature of clarification or amendment would bring huge positivity and clarity for the real estate industry and the impact can be visibly seen in a short period in the form of commencement of number of projects across the cities.

Industry status to the real estate sector will further boost the increasing of low-cost funds, cut capital costs and make land acquisition easier, passing the benefits to consumers. A single-window clearance system can help to speed up the execution of projects. We also expect the implementation of land reforms and increased liquidity to NBFCs will lead to investors. If real estate industry gets a boost it will automatically have a positive impact and will accelerate the economic growth of the country and in turn the GDP.”  - Mr. Bijay Agarwal, MD, Salarpuria Sattva Group.

“The budget needs to allocate more funds across sectors that impact the overall infrastructural development of the country. It needs to focus on improving ease of doing business. Reforms with regard to taxes, solutions to sail through the NBFC crisis and introducing single window clearance will be crucial. Encouraging the creation of alternative channels for funding, as NBFC's currently are not in a position to take further exposures is also crucial.  It would also be ideal if the government can rationalize GST rates in the sector. GST rates for few essential raw materials needs to be reduced to 18% from the current 28% bracket. Even products like petroleum and natural gas need to brought under unified GST, instead of VAT. This will bring more uniformity in the sector.  Additionally, the union budget should look at increasing incentives for affordable housing, especially with regard to income tax benefits for builders under section 80.  To make home buying more conducive, the government should reduce personal taxes for higher income brackets, as it will help in boosting the purchasing power of consumers” - Mr. Ashwin Reddy, Managing Director, Aparna Enterprises Ltd.

"The Housing segment, particularly mid-income and affordable housing, holds a huge potential for the growth of the Indian economy in terms of job creation and overall economic development. Thus, the real estate industry, particularly housing sector, is sensitive to many of the policies that are to be announced in the budget.

The Real Estate industry is eagerly looking for all time high favourable budgetary support.

  • The real estate industry hopes for according “Industry status” which is long awaited one.
  • Having prioritised affordable housing, the Budget shall make liberal allocation of funds specifically for building infrastructure and improving connectivity in the peripheral areas of the cities to augment the housing supply at affordable prices.
  • Approximately 20% -25% of the unit price goes to Government by way of taxes and fees in one form or the other. Stamp duty levied vary from state to state. Stamp duty Taxes/fees shall be rationalised. This will go a long way in reduction of the overall price paid by the home buyer.
  •  In the matter approval process, the industry expects Single Window Clarence in the real true sense as the same will go a long way in minimising the turnaround time and reduction in project cost - benefitting the home buyers the price they pay. Digitalisation, minimising human intervention is the answer.
  • The budget shall also look into supplementing ownership housing by a strong,  vibrant and sustainable Affordable Rental Housing market with different models to address diverse housing needs for various segments of the population.

I am sure that the Government will appreciate the fact that there are many transparent, credible and well organised players in the real estate sector, who are honestly interested in national growth. They are keen in accomplishing national objective of achieving Housing for All.

In my view, we can expect the re-elected Government to make suitable budgetary announcements to further strengthen the housing initiatives, particularly mid income and LIG/EWS housing. - Mr. M Murali, Chairman and Managing Director, Shriram Properties Ltd.

Updated: 29 Jan 2020
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