Budget 2020: Reforms that could boost the real estate sector

We look at some initiatives and subsidies that the union government can consider introducing in Budget 2020, to give a much-needed impetus to the real estate sector at the start of a new decade

The real estate sector is one of the crucial pillars of India’s economy and the government has recognised this, by offering various schemes, including a bailout package, to get the segment out of a slowdown. With the union budget due to be presented, there are several more initiatives that the government can take or provide subsidies, to give a much-needed impetus to the sector.

 

Industry status and single-window clearances

The real estate industry has been asking for an industry status for a long time. The affordable housing segment has witnessed a boost, after being awarded infrastructure status. Experts mention that granting of a similar status to the entire realty sector, will encourage real estate activity and help in getting investments, which are sorely needed. This, together with a single-window clearance system, will do wonders for the sector, they say.

 

Effective real estate stress fund

Although, the government has announced a real estate stress fund of Rs 25,000 crores, this plan needs to be executed properly. “Budget can be allocated to financial institutions, to increase liquidity in the banking system. Previously allocated funds have also not reached the ground level. Announcements will not change the scenario; only practical solutions can bring change to the realty market. Financial institutions can also extend the grace period for stuck projects, to support the market, the economy and home buyers,” says Dinesh Doshi, managing director, Tulsi Realty.

 

Incentives for affordable housing should be area-based

To boost its ‘Housing for All by 2022’ mission, the government had announced an incentive of Rs 1.5 lakhs, for investments in affordable housing projects under Rs 45 lakhs. Although it is a great initiative, not many people who look at investing in affordable housing in tier-1 cities, can take advantage of this offer.

“Affordable housing can be classified price-wise or area-wise. People who want to invest in affordable housing in prime areas, will never be able to avail of this benefit. Hence, it will be in the interest of home buyers, to change this incentive from price-based to area-based, so that more home buyers in the affordable segment can avail of this benefit,” points out Abhishek Sharma, managing director, Shree Sai Group.

See also: Budget 2020: What does the Indian real estate sector want from the FM? 

Ease of doing business

Easy policies will enable ease of business and thereby, attract more investment into real estate. “There should be simpler procedures for foreign investments in real estate projects. Interest and tax subsidies for timely completion of projects are much needed. Also, there should be an established credit rating for developers and projects,” suggests Sanjay Daga, chief operating officer, Runwal Developers.

 

Inclusion of Input Tax Credit (ITC) in GST and more tax sops

Even though the government promised and revised the Goods and Services Tax (GST) rates from 12% to 5% in under-construction homes, the exclusion of Input Tax Credit (ITC) came as a spoiler for home buyers and the sector at large. “Addition of these benefits will be helpful to buyers, as these taxes have indirectly increased cost by 7%-8% for the end-user. More tax sops for home buyers, such as lower home loan rates, as well as lower premiums, will definitely boost realty,” adds Doshi.

 

Improving consumer confidence

Owing to a few errant developers, the entire real estate sector is facing a crisis of confidence from home buyers.

“The State Bank of India’s (SBI’s) recent home loan scheme, on giving guarantee to the buyers with respect to their real estate investment, is a great way of boosting customer confidence. There are buyers in the market, who are ready to invest with reputed developers and the government should introduce more ways to boost their confidence,” concludes Sharma.

 

  • Infrastructure status, together with a single-window clearance system, will encourage some buoyant movement, with respect to real estate activity.
  • SBI’s recent home loan scheme, on giving guarantee to the buyers with respect to their real estate investment, is a great way of boosting customer confidence and the government should consider introducing more such measures.

 

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