The policy decisions of 2016 have left an air of uncertainty hanging in the real estate markets as scores of undecided potential home buyers are putting aside their decisions to purchase their dream homes. Hopefully, 2017 will assuage these concerns, provide a boost to property developers and bring in a more cheerful outlook for real estate markets in India. Hence, it is natural for stakeholders in this sector to have higher than usual expectations from the upcoming union budget. Strong policy changes are required for GST, infrastructure development allocations and taxation, which will enable developers to pass on tremendous benefits to home buyers, not only in terms of pricing but also quality and comfort.
First things first, we are hopeful that the Real Estate industry will be given 'Infrastructure' status which will lead to lower borrowing cost and increase fund availability. This has been a long standing demand of the industry. Recently, the focus is to control the cost and one major step could be to allow borrowings at a lesser rate by allowing external commercial borrowings (ECBs) for wider range of housing projects. This will also enable private players/developers to participate in the same. Once borrowing costs go down, more power to the customers as they will receive these cost benefits.
Another key area, where quick and concrete resolution is necessary, is to bring rationalization and quick implementation of Goods and Service Tax (GST) bill. A much delayed positive development for the sector should no longer be pushed back as it will get much needed efficiency and price benefits for the home buyer. This has been of the biggest causes of buyers adopting a 'wait and watch' policy and the Union Budget should address it. We are hoping for some relaxation for under construction projects as the existing stock suffer due to higher rate and will slow down the developer's ability to push for new projects.
Coming to taxation, we strongly recommend that the repayment towards principal part of the home loan should be taken out from section 80C of Income tax and if can be made as a separate section for availing income tax benefits for borrowers. This will be above the present limit of 1.5 lakh. While well intentioned, the current ruling brings very little cost advantage to the customer if you consider average real estate prices in Tier 1 and Tier 2 cities.
Support in terms of infrastructural development will also be greatly appreciated. While our cities get more populated and bigger, creaking infrastructure puts tremendous pressure on logistics and skews real estate demand and prices. We look forward to some allocation towards the infrastructural developments for the state specially Bengaluru city. Namma Metro which is operational in parts of the city and new phases will take some time to be operational, Sub-urban railway and Peripheral Ring Road project will ease the traffic in city and shall improve the connectivity to the adjoining towns. As more areas become readily accessible with shorter commute times, density of living distribution will ease out over the city. It remains too localized now and projects like these will help.
Recent monetary policy changes have given us a clear indicator that the government remains committed and action-oriented in bringing about positive change. We sincerely hope that this outlook will present itself during the union Budget as well. Reforms like RERA will go a long way in restoring buyer community faith and increase investor confidence. While it could do with the tightening of some loopholes and consistency in terminology, RERA-like reforms are needed to attract institutional investors who have the potential to get the real estate sector thriving again. We look forward to positive budget announcements in 2017.
(The writer is CEO of premium residential developer Raffles Residency)