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Budget 2020: Real estate industry pushes for one-time restructuring of loans

Budget 2020 latest: Real estate industry has huge expectations from the upcoming Budget 2020-21. Here's a lowdown on what the sector expects

twitter-logoGoutam Das | April 3, 2020 | Updated 07:26 IST
Budget 2020: Real estate industry pushes for one-time restructuring of loans
The list of expectations of the residential real estate sector is really long.

The Budget wish-list of the real estate sector, particularly from the distressed residential segment, runs long. They would like more ease of doing business, a more flexible definition of affordable housing, and home loans at reduced interest rates. Industry bodies such as CREDAI and the National Real Estate Development Council (NAREDCO) also think a one-time restructuring of loans would help. "Liquidity shortage continues to cause distress in real estate. Hence, a one-time restructuring scheme with moratorium on principal and interest of two years is immediately needed," CREDAI stated.

In 2019, RBI had decided to permit a one-time restructuring of existing loans that were in default, without an asset classification downgrade. NAREDCO pointed out that the benefit of the circular is not available to the real estate sector. "As a result, the restructuring or rollover of the loans triggers the provisions related to NPA. Due to the downturn in the market and also failures of several big NBFCs, developers are facing acute liquidity shortage. We recommend that the banks and financial Institutions be given discretion to one-time restructuring and/or rollover of their existing loans on the lines of loans to other sectors," the body suggested. NAREDCO also wants interest rates on home loans to be reduced to 7 per cent an annum - that could revive some of the demand and help the industry reduce its inventory of unsold apartments.

FULL COVERAGE:Union Budget 2020

Sanjay Dutt, MD & CEO, Tata Realty and Infrastructure Limited said that the state government's role is equally critical when it comes to reviving the sentiment in the residential segment. "The central government can start with granting industry status to the real estate sector. States can give single-window clearance mechanism for faster completion of projects. Reduce cost of doing business besides ease of doing business, reduce cost of capital to 5-6 per cent, making real estate development more viable in the light of regulated inflation under four per cent," he stated. "As seen with several of the previous reforms, the benefits remain to be passed on to the homebuyers and it is crucial for this year's budget to incorporate some relief for taxpayers by easing the tax on house property income. Increasing the deduction for interest on housing loan to at least Rs 5 lakh would also help tremendously in boosting the demand. We are optimistic that the market will gain momentum in a period of about three-five years, provided the government continues the introduction and execution of these economic reforms to enhance the sentiments of the industry," he added.

J.C. Sharma, Vice Chairman and Managing Director of SOBHA Limited wanted the definition of affordable housing to be amended. Currently, a flat with carpet area up to 90 square metres in non-metropolitan areas and 60 square metres in metropolitan cities are categorised as affordable. They cannot cost upwards of Rs 45 lakh. "While the Government has been bullish about the affordable housing segment, the value limit of affordable housing at Rs. 45 lakh is an obstacle for this segment. In cities such as Bengaluru, the limit of Rs. 45 lakh is unrealistic due to variable land prices within the city," he said. The value limit should be Rs 75 lakh, he suggested. Affordable housing comes with reduced GST rates and benefits of tax exemption for such projects.

Also read: Luxury flats up for sale at Mumbai's iconic RK Studios; prices start Rs 5.7 crore

Also read: Budget 2020: Scope of personal tax cut grows slim as govt stares at tax shortfall of Rs 2 lakh crore

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