The Modi government came back to power with a bigger mandate in 2019 than in 2014. Surely, therefore, there were high expectations from Budget 2019, more so by homebuyers whose lifetime savings are stuck for years.
The hope also gained strength from the fact that the Modi 1.0 Government passed the Real Estate (Regulation and Development) Act, 2016 (RERA) which was a pointer to its serious intent in resolving issues plaguing the real estate sector. But in spite of three years of RERA, not much has been done towards the completion of delayed projects. And that is why homebuyers had pinned their hopes on Budget 2019.
In our Budget recommendations to the finance minister, we suggested the creation of a ‘Stress Fund’ worth Rs 10,000 crore to complete stuck real estate projects within five years. To ensure that the fund remained only a stop-gap arrangement and did not become a bailout package for defaulting developers, we also suggested that for projects which would benefit from the Fund, their promoters be stripped of their company and personal assets. This would help realise the entire funding utilised for the completion of such delayed projects. Additionally, they should be barred from carrying on business for life, we suggested.
This was achievable by giving power to authorities to seize and attach with a mandate to complete the entire exercise in six months. The implementing desk/task force could be set up at the housing ministry, to identify and complete the projects. The idea was not to utilise tax payer’s money for the purpose.
If we see the last three budgets, we find that the government has gone all out to induce growth in the real estate sector by giving various sops to the industry and its consumers. Some announcements made are:
Budget 2017: Infrastructure status to affordable housing, Capital gain Tax period reduced to 2 years from 3 years, Notional tax on unsold inventory chargeable only after one year. Budget 2018: For property transactions, no modification while taxing income from capital gains will be made in case where the variation is not more than the 5 percent of the ready reckoner or circle rate. Interim Budget 2019: Individuals who owns up to two self-occupied properties not to pay any notional rental tax, TDS threshold on rent increased from Rs 1,80,000 to Rs. 2,40,000, Rollover of capital gains up to Rs. 2 crore towards buying two houses compared to only one earlier, Benefits under Section 80-IBA IT Act extended to projects approved till March 31, 2020, Period for taxing unsold inventory extended up to two years. Budget 2019: Interest deduction up to ₹3.5 lakh for affordable housing (priced at ₹45 lakh) as against ₹2 lakh earlier (for housing loans taken in FY 19- 20.
Despite these sops have we reached anywhere near the peak in terms of sales volume and launches achieved in the last 10 to 15 years? Are the government’s actions achieving the desired results? NO. Hence we can safely infer that allurement cannot induce growth especially when the industry suffers from poor credibility and huge trust deficit.
How can it be expected that there will be a rush to buy just to get tax benefits of Rs 7 lakh spread over 15 years when there is no guarantee of the balance Rs 38 lakh, when all other parameters remain same i.e. same developers, same administration, same inaction by the government and similar judicial intervention which failed to give justice. Here the case is once bitten forever shy.
Buying a house is in itself is a sop for a buyer because it serves as forced savings which take the shape of sound investment, consequently saving on rental expenses. Thus, whenever anyone attains the capability to afford a house, which includes the capacity to get loans, he will go for it provided he is confident that his money is safe, he will get what he has been promised and that in case of default he will get prompt justice. This is the only assurance, which is needed for sustained high growth in the sector.
The need of the hour is to attack the root of the cause. By accepting our suggestions, the government would have sent the right signals to all stakeholders:
Consumers: that the government shall intervene when needed and ensure that their life savings are safe. Developers: that they cannot get away with their misdeeds. Administration and Authorities: that the nexus will not be allowed to continue.
This would have cleaned up the sector, infused rapid development, restore faith, all at a bare minimum cost.
Budget 2019 has proved to be a big disappointment for homebuyers stuck in delayed projects, and also equally failed in convincing those waiting in the wings to purchase a house.
We hope the government reconsiders our suggestions before the Budget is finally passed by Parliament.
Abhay Upadhyay is national convenor, Fight for RERA and President, Forum For People's Collective Efforts (FPCE).