Budget 2019: Real estate expectations– from GST to interest exemption on home loans; What sector demands?

Budget 2019: As the industry is coming to terms with these unprecedented reforms, it will be compelling to see how Government will reflect on fuelling the growth of the industry through present interim Budget of FY 2019’-2020’.

Budget 2019: The real estate sector in India entered a revitalisation mode during 2018 where the teething problems posed by various regulatory reforms started settling in.

Budget 2019: The real estate sector in India entered a revitalisation mode during 2018 where the teething problems posed by various regulatory reforms started settling in. With key policy reforms such as RERA, GST and demonetization introduced in 2017, the year gone by has turned out to be an inflection point and has started to weed out inefficiencies from the sector leading to the era of transparency and accountability. As the industry is coming to terms with these unprecedented reforms, it will be compelling to see how Government will reflect on fuelling the growth of the industry through present interim Budget of FY 2019’-2020’. Though the real estate is continuing to evolve into a more dynamic business and getting accustomed to the numerous compliances, there are certain challenges that are hindering its growth. Industry Status to Real Estate Sector: Allotment of “industry status” to real estate sector has been a long-standing demand of the real estate players. Not having an ‘industry status’ becomes difficult for real estate sector to avail legitimate finances from Banks and other financial institutions.  Industry status can help in getting low-cost loans from the system, and then the cost benefit with regard to high-interest loans from outside the system can be further moved on to the consumers. We feel that this is well deserved and long due for the sector that is the second largest employer in the country and supports more than 130 ancillary industries across the nation. GST on Real Estate: Government is also likely to consider reducing GST from 12% to 5% on under-construction homes where completion certificate has not been issued. This change will make housing affordable on paper but practically it will increase the construction cost as new regulations doesn’t allow developers to take input credits which are eventually added to the final price of the house. While the Government is planning to reduce GST up to 5%, they should also consider reducing GST on capital goods and input services used for the construction of flats and houses which attract 18% GST and cement used for construction that attracts 28% tax which will contribute towards making housing affordable. Increase in Exemption of Interest on Home loan Limit: To support millions of first time buyers across the nation, the government should increase the limit of tax deduction on interest on housing loans up to 5 Lakh from present limit of Rs 1.5 Lakh per annum. A decent affordable apartment in urban areas like National Capital Region will cost around at least 50 Lakhs and above, and keeping in mind that an average rate of interest on home loan is anywhere between 9%-10%, this step is extremely important to fulfil Prime Ministers dream of Housing For all 2022. Single Window Clearance for Real Estate projects: To increase the efficiency and timeliness of the project, single window clearance mechanism is prerequisite for the growth of the industry which will benefit developers as well as end consumers. In the budget 2019, it is expected that Government will make provisions to resolve the issues in clearance and approval process for residential projects which will also help Government in achieving the aim of Housing for All by 2022.  At present the multiplicity of permissions and approvals that developers are required to secure and the lack of single window clearance, it could take anywhere from 18 months to 36 months before beginning any project. Single window clearances as envisaged wont just cut down the project delay but significantly impact the construction costs. In an after RERA scenario where developers cannot afford any further delay in the project delivery to avoid penalties, lack of provisions to facilitate smooth clearances and approvals from government authorities is acting as an obstacle in the execution process. Incentivise Green Building projects: To meet the rising demand for housing, developers are initiating new projects but construction of these new projects will contribute towards India's deteriorating urban environment. Marginally higher cost of construction of green buildings has kept a majority of developers away from investing green buildings.  Hence, it is expected that government will encourage developers with higher incentives in terms of FSI and/or some degree of tax exemption to encourage them to adopt green building technologies. - Amit Modi, VP CREDAI Western UP and Director ABA CORP