The real estate industry, which is grappling with unsold inventory, price stagnation, falling sales numbers, delayed housing projects and a liquidity crunch, is now looking to the Union Budget 2019 to spark off a revival. "The real estate sector has high expectations from the new government to improve liquidity, balance fiscal discipline with stimulus, expedite resolution of stressed projects and streamline implementation of RERA (Real Estate Regulatory Authority Act)," said Aashish Agarwal, Senior Director, Valuation and Advisory, Colliers International India.
Industry stakeholders also hope that Finance Minister Nirmala Sitharaman will address the following expectations in her maiden budget:
FULL COVERAGE: Union Budget 2019
Lower the tax burden: "The Indian real estate sector is the most highly taxed with the combination of high direct and indirect taxes, stamp duties and levies for development approvals. These extraordinarily high taxes coupled with high interest rates have been crippling growth," said Surendra Hiranandani, founder and director, House of Hiranandani. In order to achieve the objectives of the 'Housing for All' mission, he believes that the government needs to incentivise the key stakeholders through direct and indirect tax measures. "There is significant expectation to cut GST rates to a single, standard rate, and not have multiple rates or taxes," he added. Government to impart industry status to the sector.
Continue focus on 'Housing for All': The government has taken multiple steps like providing interest subsidy, for affordable housing, infrastructure status and reducing the GST rates etc to achieve its objective of "Housing for All by 2022". The industry expects the government to remain focused on its objective. Experts also recommend the National Housing Policy to boost rental housing in order to fulfil the ambitious target of Housing for All by creating surpluses.
Faster clearances: A single window clearance is a long pending demand of the real estate industry. Delay in getting clearances leads to increased cost, which ultimately has to be passed on to the home buyer. A faster approval process with reduced documentation will benefit the industry and ultimately the home buyer. "We expect that the new government can do away with unnecessary documentation, which will help real estate players immensely. It is important that single window clearance is soon put into practice, which will not only resolve operational issues prevalent in the industry but would improve the productivity of the real estate industry. Currently, the permissions are coming at a snail's pace," says Hiranandani.
Input tax credit under GST: In order to boost the demand in the real estate sector GST council has already reduced the GST rate for under-construction flats to 5 per cent from 12 per cent and for affordable housing to one per cent from 8 per cent without claiming the input tax credit. This was a welcome move from the homebuyer's perspective as it will reduce the cost for them but the margins of developers are likely to get impacted. So experts hope that Sitharaman's budget shall revise down input side GST rates to restore shrinking margins.
"The softening of GST norms in terms of privilege pertaining to input tax credits for developers, the inclusion of stamp duty, registration charges and taxes on the cost of electricity under GST will be instrumental in bringing in equilibrium between the demand and supply in the segment," said Aditya Kedia, Managing Director, Transcon Developers.
In addition to the above, the wishlist includes uniform implementation of RERA regulations across the country, industry status for housing projects - which would enable developers to cut capital costs and pass on the benefits to consumers - and increasing the finance limits for NBFCs.
With PTI inputs