Budget 2018 Wishlist: Developers Ask For Industry Status, Lower GST On Real Estate, And More
Real estate is a capital-intensive industry and therefore, most of the property development is funded by customer sales proceeds. As the sales have been slow in the past few years, developers have been forced to borrow and the interest rate costs either eat into the profitability of the developer or are passed on to the homebuyers. Also, with the rising cost of construction and labour the sale prices of the properties have seen an unprecedented acceleration. In the past 24 to 28 months, the sector has experienced liquidity crunch coupled with slowdown in demand. This real estate industry scenario where the costs are high and sales are low has stressed all the real estate stakeholders. It's that time of year when wishlists are put forward, hoping for some concessions:
*Granting industry status to the sector.
*Further increase in Income Tax exemption limit on re-payment of interest on home loan from Rs 2 lakh to Rs 2.5-3 lakh.
*Higher Budgetary allocation for the 100 Smart City project.
*Further incentives for affordable housing in terms of financing and land acquisition.
*Finance minister should also try and leave more money in hands of the tax payers by way of rationalisation of income tax slabs (this will indirectly boost realty).
*Re-introduction of tax holiday for affordable housing projects.
*Faster implementation of plans under the Rural Infrastructure Development Fund projects.
*Increase deductions towards rental income to incentivise and boost rental housing in India.
*Disallow long-term capital gains on the sale of the property.
*Introduce special residential zones like to boost low-cost housing.
*Introduction of procedural reforms.
Here's what the industry is looking forward to:
The feelers doing the rounds indicate that the Union Budget 2018-19 is likely to look into reducing the income tax slabs and various other taxes, benefiting the common man.
In terms of real estate, the government should increase housing loss set-off limit of Rs 2 lakh which will allow taxpayers to set off a larger part of the house property loss against other income and help boost demand.
It would be wise to eliminate the Goods and Services Tax (GST) on the affordable housing category. However, if not, then a lower GST on it, is being avidly sought by realtors. Further interest rate subsidies on home loans must be provided to the Middle-Income Group households. For instance, households earning between Rs 6 and Rs 12 lakh a year can claim a four per cent subsidy on home loan amounts up to Rs 9 lakh. Households earning between Rs 12 and 18 lakh annually can receive a three per cent subsidy on loans amount up to Rs 12 lakh. We would want these caps to be raised so that they are in tune with the ever-escalating costs of property ownership in urban areas and yet again reboot demand in the industry.
Reduction in corporate tax to between 18-25 per cent and lastly greater incentives to developers to encourage the public-private-partnership (PPP) model to achieve prime minister's vision of housing for all by 2022. Furthermore, under the Section 80IBA of the Income Tax Act, Provision 2(b) to be amended to include, in cases where more than one approval has been obtained, the last approval taken to be considered under the act for tax benefits. To further bolster growth in the housing sector, interest exemption should also be included for second homes.
Ashok Mohanani, Chairman Ekta World and Vice President NAREDCO West
The real estate sector has been impacted by policy reforms such as the real estate law, GST and demonetisation. The upcoming Union Budget is an ideal time to push policies. We urge the FM, to grant an infrastructure status to the entire sector making funds available at much lower interest rates for developers' community.
Also, we need an abolition of stamp duty, which unfortunately continues to remain in force even after the GST was implemented, leading homebuyers to pay much higher than ever before. Lastly, we wish to reduce long-term capital gains holding period from three to one year in Real Estate Investment Trusts (Reits) to make it more attractive for investors.
RK Arora, Chairman Supertech Ltd
2017 was certainly a year of change with the implementation of several reforms which brought in consolidation and transparency in the sector. In 2018, we look forward to a budget with amendments that will boost growth of the economy and that of the realty industry. Certain key areas like industry status to the full real estate industry, streamlining taxation norms for Reits, rationalisation of GST, stamp duty reduction/uniformity and implementation of single-window clearance need to be addressed.
Kishore Bhatija, Managing Director, K Raheja Corp
The Union Budget is expected to be a positive ray of hope for the realty players this year. Some of the key expectations include agreement to the present inflationary conditions and the hike in property deals. Apart from the deduction on interest, we would urge the FM to consider specifications on deductions made for the payment of major amount of housing loans.
Affordable housing is a key driver for growth in the real estate sector and there will be an expectation of a better response from the buyers in the middle-income category. Developers will benefit from tax holidays and it will aid in reducing endowment as affordable housing receives infrastructure status.Therefore, the developers will be able to pass more benefits to the buyers.
After an infra status was given to affordable housing segment in the previous Budget, the segment has witnessed more project launches as compared to others. Affordable housing witnessed a year-on-year growth of six per cent, with Mumbai leading the trend. Granting industry status for the real estate sector will increase accessibility to long-term financing at a lower cost. With regards to the new investments, the Union Budget should announce new models for implementation of public-private projects.
Although the Reits ensure a positive outlook, there are no listings. To encourage this, the Budget needs to cut down the long-term capital gains holding period to one year.
We are expecting the rationalisation of the GST rates from 12 per cent to six per cent coupled with merging additional stamp duty and registration with the GST or reducing the overall cost could ensure the industry is seeing progress in the right direction.
The industry is also expecting some reforms in land acquisition that will act as a stimulator for growth in affordable housing. Not only that, it will remove entry barriers for many private players, encourage new launches and ensure prompt delivery of projects.
Dharmesh Jain, Chairman and Managing Director, NIRMAL
The sector's biggest expectation from this Budget would be addition of the sector in entirety under the GST regime and also, the current GST rate should be lowered down to eight per cent. This is because homebuyers are postponing their buying decision till the project is not fully complete as the GST is valid only for under-construction properties. Second element that need to ponder is that the Centre should make some norms that can facilitate 100 per cent foreign direct investment (FDI) for affordable housing as it is the need of the hour. Third, the construction loan should be given at a cheaper cost to developer for smooth functioning and delivery of projects.
Aniket Haware, Managing Director, Haware Builders
It is expected that the Budget will focus more on the infrastructure and housing sector to boost the country's GDP. In the last year Budget, affordable sector was given infrastructure status, with that we expect more for the segment to fullfil the government's dream of housing for all by 2022. The consumers expected consolidation of demand and over improvement in the market segment, in 2017 we expected that the real estate law will bring transparency, while the GST would ease the sector, but unfortunately both these expectations were not met. In the coming Budget we expect the applicable GST on the real estate to come down and should also include reforms which will be in a favour of the developers and the buyers.
Ssumit Berry, Managing Director, BDI Group
Real estate sector experienced many jolts in the year 2017. The real estate regulatory act (RERA) came into force in May 2017 seeks to protect the home-buyers, as for 2018-19 Budget the entire sector expects transparency, accountability and to increase investor confidence in real estate market in long run. In the same year the GST was also implemented, which replaced multiple taxes. To further promote the sector incentives should be given to the first-time homebuyers which will definitely promote the real estate segment, in the long run. Focus should be given for the supply of ready-to-move-in properties as the developers are seen focusing on completing their existing projects.
Ravish Kapoor, Director, Elan Group
Real estate is witnessing a challenging time presently, therefore, we are very hopeful for some measures that will bring relief to the sector. With the Union Budget around the corner, the sector expects a decrease in the stamp duty as it increases the overall cost of the property. Section 80EE of the Income Tax Act, works in favour of the first-time homebuyers as it provides an added tax benefit of Rs 50,000 on the home loans sanctioned during the financial year 2016-17, which should be extended this year as well, to refresh buyer sentiments.The sector is also expecting more clarification in terms of the GST rates for various properties including under-construction.
Vineet Relia, managing director, SARE HOMES
The time when the Union Budget is presented, the financial markets around the world are not in the best health, so the sector expects greater attention to bring larger investment which will help in the development of the sector benefiting its end users and the country. The forthcoming Budget may increase the standard deduction limit on rental income which may fulfill the dream of more people of owning a home. As of expectation, ready- to- move in will be given special preference because of the developers sustained focus on completing their existing projects.
Rahul Singla, Director, Mapsko Group
The biggest expectation from this Budget would be inclusion of the sector in entirety under the GST regime, and not just the properties under-construction, as is the case now.
Also, it is expected that there will be a cut in the long-term capital gains holding period for the Reits from three years to one year.
The Budget could introduce a certain percentage of tax on holding on to inventory after all aspects of building construction are complete, and the occupancy certificate has been obtained. Real estate sector may be granted an industry status, which will help the sector access long-term financing at lower cost.
Sankey Prasad, Chairman and Managing Director, Synergy Property Development Services
There should be additional deduction for pre-construction interest and the Budget needs to cut the holding period for long term capital gains from two years to one year which would encourage investments in Reits. Keeping in mind lifestyle change and higher demand of rental by millennial generation, better rental policies will create a demand and revenue generation in the industry.
The upcoming Budget should reduce the regulatory compliance for corporates and facilitate investments to drive growth. Loans up to Rs 12 lakh have been given a boost with a reduced rate of interest. While this is a step in the right direction, the quantum of Rs 12 lakh should be increased substantially, to benefit a larger class of people.
The government should make land available at a cheaper cost of capital to promote the affordable housing sector. With the current high cost of capital, the government policies should promote single-window clearance and smoother approval process including environmental clearance within specified timelines. The government must look at reducing this cost and rationalising and uniform stamp duty rates across the country. The taxes and stamp duty are a major hindrance to development today.
Manju Yagnik, Vice-Chairperson, Nahar Group
There are two main pre-budget expectations. The first one is that presently the affordable housing category is limited upto 60-sqm area only, this area limit should be increased so that the MIG category housing can also come under the affordable housing category.
The second main pre-budget expectation is to reduce the current GST of 12 per cent to six per cent.
Parveen Jain, CMD, Tulip Infratech