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‘Urgent Need To Address The Challenge Of Liquidity’

The momentum of infrastructure development should continue so that the growth is decentralised and migration to urban areas remains under control.

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Given the policy reforms undertaken by the government over the last few years, we are hopeful that the upcoming Budget will provide a much-needed stimulus to the real estate sector. We expect the Union Budget to push investment in infrastructure, relax income tax slabs, assist the private sector and announce more measures that will boost the real estate industry. There are a few key points that should be looked into by the government in the upcoming Budget, which will positively impact the real estate industry. 

There is an urgent need to address the challenge of liquidity faced by the sector, especially after the NBFC crisis. Liquidity will enhance sentiment in the market with a steady supply of ready-to-move-in homes. If the challenge is not treated on priority, it will hamper the confidence of developers as well as buyers, which may severely impact the sector as well as the economic growth.

Quick allotment of the Alternative Investment Funding with an initial aid of Rs 25,000 crore needs to be executed on a priority basis. Another measure can be reviving the Input Tax Credit (ITC) for the housing sector. After the reduction in the GST rates, the government had withdrawn the ITC. Its revival can provide relief to the developers and housing can be made available at a lower cost.

To push the fence-sitters to buy homes, along with the existing subsidies on affordable housing, there is a need for deductions in personal taxation. This measure can go a long way in boosting overall consumer demand and help in lifting the economy. An increase in the existing Rs 2 lakh tax rebate on home loan interest rates will once again be a good move. This could result in higher demand for housing, especially in the affordable and mid-segment categories. Interest rates on home loans need to be reduced. Reduction in stamp duty to at least an extent of 50 per cent can also help raise demand.

While these are the demands that need to be resolved on a priority basis, following are some demands that have been pending for some time and, if cleared, it can help in reviving the sector considerably.

For a while now, the real estate sector needs an industry status, which can help them with finances at a lower cost, especially at times when the availability of funding is a major headwind for the industry. Single window clearance can aid in quick approvals and execution of the project.

There is a need to redefine ‘affordable housing’. As per the GST and income-tax laws, a house has to meet the dual condition of not exceeding 60 square metres of carpet area and a price cap of Rs 45 lakh to avail of reduced the GST rate of 1 per cent for affordable housing and also the benefit of tax exemption for such projects. However, this condition related to a price cap of Rs 45 lakh needs to be extended.

Affordable housing will be a major growth driver in real estate. However, there are other multiple concerns such as unavailability of urban land at reasonable prices, rising costs of construction, high taxes, regulatory issues and unfavourable development norms owing to which developers are hesitant to enter into this segment. The momentum of infrastructure development should continue so that the growth is decentralised and migration to urban areas remains under control.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Surendra Hiranandani

Surendra Hiranandani is the CMD, House of Hiranandani.

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