While policy changes like demonetisation, the Real Estate (Regulation and Development) Act (RERA) and the Goods and Services Tax (GST) may have caused a temporary slowdown in the real estate market, the long-term impact will be positive, if the government provides the necessary infrastructure support, says Niranjan Hiranandani, national president of NAREDCO and CMD of Hiranandani Communities, in an exclusive interview with Housing.com News
Q: What should the government do, to improve sentiments in the real estate market?
A: Rationalisation of tax is very important. The Goods and Services Tax (GST) should be kept at five per cent. It should subsume stamp duty and registration too.
The government artificially rakes up land prices, by inflating ready reckoner/circle rates. This aspect needs to be addressed, in order to rationalise taxes on India’s real estate sector – we have counted 39 different taxes – which is very high compared to other global markets.
We also need measures from the government that would boost the economy, increase GDP and enhance ease of doing business.
Q: What are your expectations from the upcoming budget in 2018?
A: Housing, infrastructure and real estate would be key issues for the Budget to focus on, as their multiplier effect on the economy will be extremely positive. I hope that the government tweaks policies, to make public-private partnerships work and create affordable housing for India’s home seekers.
I would also look forward to policies that promote rental housing. The budget should remove notional tax levied on vacant rental homes. Capital gains tax also needs to be dealt with in the right way, so that more rental homes are constructed. Finally, the deduction for rental income should to be revised from Rs 30,000 to Rs 50,000.
Having said that, it is always a difficult balancing act for the finance minister.
Q: Do you think that the pace of infrastructure development is enough, to support the growth of the realty market?
A: Largely yes, although one does get the feeling that it could be faster. For any economy to revive and grow, a revolution in infrastructure is required, like we have seen in Germany, Singapore, Dubai, Hong Kong, etc. Higher spending on infrastructure projects, will generate employment, revive economic growth and ensure better GDP. Large-scale infra projects will boost the construction and allied industries. It will open up new micro-markets and peripheral locations of metro cities. For the real estate market’s growth, infrastructure is not just about transport connectivity but also includes sufficient water and electricity supply, a safe and secure environment with medical, retail and academic facilities in close proximity.
Infrastructure projects like the Ahmedabad Metro, which links with the BRTS system, the proposed second airport in Chennai, the Navi Mumbai Airport and suburban railway linkages, the Trans-Harbour Sea Link, ferry services between south Mumbai and Nerul in Navi Mumbai, the coastal road project and metro lines, will definitely have a positive effect on real estate growth in their respective regions.
Q: What has been the impact of demonetisation, RERA and GST on the sector?
A: Demonetisation, GST and RERA will have a positive impact, in the long run. These three will promote digitisation of payments, transparency in real estate and one rate of taxation across the country. Obviously, it will create a better environment for real estate to flourish.
Q: Could you name three things that could trigger growth in realty market, in the near future?
A: The government will have to ensure that the advantages of economic policy changes and the new regulatory regime, are not diluted. They should also ensure that home seekers understand the advantages that they can avail.
Speeding up rationalisation of taxes, by bringing the real estate sector fully into the realm of the Goods and Services Tax (GST) and effectively ensuring that existing taxes are subsumed, would be the second measure.
Finally, affordable housing is getting the government’s attention and given the positive impact, it should be the driver of growth for residential real estate.