Real estate is one of the biggest contributors to India’s gross domestic product (GDP). The major policy changes announced by the government have definitely benefited the sector by creating a rather transparent, reliable and fast working system. The sector is also likely to benefit due to the stable growth of the economy, as various industry reports forecast the GDP growth to touch $4 trillion by 2023.
This is also supported by increasing foreign direct investment (FDI) across sectors and a slew of structural reforms like Goods and Services Tax (GST) Act, Land Acquisition Bill and RERA among others. Another testament of the initiatives undertaken by the government for the real estate sector is the Ease of Doing Business 2019 ranking, where India saw a massive jump in the parameter “dealing with construction permits” to 52th position from 181st a year ago. This is a result of reducing time for processing permit applications, streamlining procedures, and improving transparency among other measures.
The real estate industry is looking forward to the interim Union Budget of 2019 as a beacon of hope for developers and homebuyers. A few expectations from the budget are as given below.
A joint report by JLL and CREDAI found that the Indian real estate sector is projected to reach $180 billion by 2020. The industry has been a prime contributor to the India’s overall GDP and the government’s perpetual efforts in creating a transparent, reliable and fast working real estate industry has been received well across the globe considering the growing NRI interest. In an effort to realise the government’s dream, each stakeholder has been playing their role to grow the industry further and the government’s decision this budget would boost the industry to reach its true potential.
For Homebuyers: Post the implementation of GST, the rate of 18 percent has been levied on under-construction properties, wherein land helps with a reduction of around one third of the tax, which works out 12 percent on the sale value. The reduction of the overall rate should be brought down to 5 percent, which would lead to high incentive and thereby generate more demand in the industry.
It is also the hope that this budget will bring good tidings for the taxpayers with the individual income tax deduction limit to increase. The more tax benefits allow consumers to view real estate as a good investment source, driving demand for the sector which further helps in reviving the sector all together.
Additionally, a higher relief on housing loan rates allows homebuyers to source capital easily while their EMIs help to flush cash into the economy as a whole.
A steady structure for approval processes has been on the cards for a while. The first step in this regard could be to have a master approval process for zoning levels or environmental clearances. There is a need to reduce the time spent on attaining documentations and approvals for developers in order to work on the handover timelines promised to homebuyers.
RERA Act has been set up to address pertinent issues such as project delivery delays, property pricing, quality of construction, and title and other changes. However, it needs to more holistic and include contingencies for delays caused by slow approvals. This will help to ensure that the act is fair to all stakeholders. Additionally, the authority should also consider a period of remedial for projects that are being constructed pre and post RERA implementation.
The government should consider reduction in corporate taxes as it will help the real estate developers.
Additionally, the uniformity of stamp duty norms across states will further help in reducing the misinterpretation through a simpler tax regime. Stamp duty, is a tax levied on documentations and transactions such as buying and selling of land, and hasn’t been included within the purview of GST. This tax differs from state to state which effects the developers and ultimately the consumers.
An increase of the finance limits for a non-banking financial company (NBFC) will further help developers in attaining capital for their projects.
Furthermore, a critical move to create a fund to help buy out stressed inventory in at least the six major cities or offer a tax concession for Asset Reconstruction Companies.
Extension of Sunset Clause
India is a services driven economy
(a) dominant irreplaceable position internationally given the sheer size of talent pool (which no other country in the world can currently match) ensures a sustainable /defendable growth story;Hence, continuation of SEZ benefits (Income tax) beyond 31st March 2020 is of significant importance as it will have a cascading impact on underlying economic growth:
Generation of direct and indirect employment. Earning of foreign exchange revenue. Consolidation of India’s dominant position internationally - Strengthen its competitive advantage in IT/ITeS and overall, in the Services domain. Other industries (including SMEs) to adapt and gain from the best practices that flow through as a result. Sanjay Dutt is managing director and chief executive officer of Tata Housing. Sanjay Dutt is managing director and chief executive officer of Tata Housing.