The newly formed National Democratic Alliance government led by Prime Minister Narendra Modi is getting ready to present its first Union budget on July 5. Various industries are pinning high hopes on Finance Minister Nirmala Sitharaman, who is already saddled with multiple issues including the slowing economy, liquidity crunch owing to the non-banking financial companies (NBFC) crisis, increasing unemployment and rising non-performing assets (NPAs) of banks.
Real estate contributes around 7 percent to the country's GDP and generates 14 percent of total employment. Despite the Modi government's efforts to improve the sector, real estate industry continues to see de-growth with homebuyers complaining about delayed projects and unfulfilled promises.
Many home buyers and industry representatives have been urging the government to take steps for the creation of a stressed asset fund to deal with the issue of incomplete projects and provide an EMI holiday to those whose houses have been facing undue construction delays.
"The expectations from industry stakeholders revolve mainly around redressing liquidity crunch, which is imperative to fuel Indiaâs growth engine. The choking of liquidity is taking a toll on the health of realty companies and further inflicting financial damage. Quick corrective steps should be undertaken by apex bodies and the government to pump in enough liquidity in the system to bring economic growth on track," said Niranjan Hiranandani, national president of Naredco and managing director of Hiranandani Group.
"The industry also looks for measures such as tax rationalisation by subsuming stamp duty in the GST, extending Input Tax Credit to the commercial segment, reducing corporate tax and abolishing of MAT to provide thrust to SEZ developments," he said, adding that "another expectation is to frame National Rental Housing Policy to meet the target of housing for all by 2022."
Amit Wadhwani, co-founder of Sai Estate Consultants, has agreed with Naredco president's views. âThe rationalism of taxes by subsuming stamp duty in the GST is certainly one of our biggest expectations from the Union Budget 2019-20. The liquidity crisis due to NBFC defaults and rising NPAs of banks, along with the piled up unsold inventory due to weaker consumer sentiments on the back of unemployment, can hamper growth in the industry. The government is expected to carefully evaluate these aspects and take remedial measures," he opined.
However Wadhwani remains optimistic. "The cut in the repo rate by 25 bps to 5.75 percent ahead of this yearâs budget can be marked as a positive sign for the sector, as this reduction will surely boost the demand for housing," he noted.
According to Ashok Mohanani, chairman of EKTA World, schemes like 80-IB, permitting input tax credit (ITC) in GST, removing deemed rent on unsold inventory and scrapping the Rs 45 lakh cap for affordable housing at least in metros will stimulate growth.
Farshid Cooper, MD of Spenta Corporation, hopes that the new government's first budget will put the economy and middle class at the forefront and takes a holistic approach to augment job growth in the real estate sector. "They should focus on affordable housing and all industry stakeholders are willing to support the government to ensure that 'housing for all' mission will regain momentum," he added.
Amit Ruparel, managing director, Ruparel Realty, is of the view that in the upcoming Union Budget, the finance minister should grant infrastructure status to the housing sector which will be encouraging for developers. "Furthermore, it will be an ideal situation if the GST is revised for construction materials such as cement to make them more affordable. Having a single window clearance is what we look up to, which will be beneficial for both the developers and the consumers, â he observed.
Rohit Poddar, managing director, Poddar Housing and Development Ltd said: "A reduction in interest rates will help resolve the existing liquidity crisis and will ensure the monetary flow in banks and NBFCs. A clear road map for regulations is needed and further corrective measures should be taken to rationalise the GST."
âThe reality of realty sector is that the industry is facing three major problems.Â Increasing input cost due to abolishment of ITC and exorbitant development premiums, excruciating liquidity crisis due to NBFC defaults and rising NPAâs of banks and piling up of unsold inventory because of weak consumer sentiment and high unemployment. It is one of the worst phases for real-estate as an asset class, underperforming by leaps and bounds vis-Ã -vis others. Hence the wish list of the sector is long which was left ignored in the interim budget due to the government's focus on populist policies ahead of election,â Parth Mehta, managing director, Paradigm Realty said.
Shishir Baijal, chairman and managing director, Knight Frank India, suggested that the government should consider providing Industry status to real estate which would enable developers to raise funds at lower rates and augment their execution capabilities."Besides real estate, another prominent area of intervention is urban mobility. The government should accelerate its initiatives for infrastructure development which will provide cheaper land for housing and ensure better affordability. Further to meet urban housing requirements government should consider promoting the development of an institutional rental market," he added.