Real Estate

Union Budget 2019: Real estate sector hopes for industry status, further push to REIT agenda

The real estate sector is hoping the Narendra Modi government’s second term in office will lead to the fulfilment of promises made given that some programs were announced for the sector. Industry players weigh in:

Rajesh Jaggi, Everstone Group

This is the first full budget after the National Democratic Alliance’s (NDA’s) resounding victory for a second term and we are looking forward to the Government’s initiatives to boost the consumption which in turn will help the economy to grow, benefiting all sectors. As an industry, we are looking forward to some rationalisation of taxation. The input credit norms for warehouse construction and operations needs to be relooked at. Presently, there is an accumulation of input tax that leads to a high incidence of tax on warehousing services. With digitisation coming to the fore in almost every sector, warehousing and logistics is gearing up for an in-depth adoption of digital technologies. We hope the budget incentivises adoption of various technologies in the logistics sector, this would help us to keep pace with the international standards of packing, material handling, WMS, etc. and help drastically improve the efficiency and effectiveness of the sector as a whole.

Amit Gossain, MD, KONE India and Chairman, Real Estate & Building Technology, CII

The earlier housing initiatives of the government should get a boost with necessary reforms, thus enhancing the overall growth of the economy. There are many positives anticipated in the infrastructure sector; the introduction of tax-free bonds to boost investment, streamlining of the land acquisition process and increase capital outlay towards Infrastructure Sector by 12-18 percent, to name a few.

 Union Budget 2019: Real estate sector hopes for industry status, further push to REIT agenda

Representational image. Reuters.

Prime Minister’s Mission of Housing for All by 2022 will enter its significant second phase, which is bound to be an extremely exciting time for all industry stakeholders. The low-interest rate loans, the special interest rate for Women, Tax exemptions with specific investments, rollover capital gains, capital outlay under PMAY and other such schemes will support the Infrastructure growth. However, the building of such large number of housing, much of which is based on tenders should ensure houses and their related fixtures such as fittings, elevators and building material is of high quality with high longevity and safety factors.

The Budget is also expected to provide direction on the long-term projects being undertaken under the Smart Cities Mission, and Atal Mission for Rejuvenation and Urban Transformation (AMRUT) programme. To continue the momentum for Indian Realty and Project the next wave of the Economic Growth, the government should allow tax benefits for investments in Real Estate Investment Trusts (REITs).

Shishir Baijal, Chairman & Managing Director at Knight Frank India, international property consultant

The Central Bank and government have taken meaningful measures to alleviate the stress in the real estate sector by executing three successive repo rate cuts and rationalising the Goods and Services Tax (GST) regime. Now is the time to look further and focus on more specific issues. Following are a series of expectations from the first Union Budget of the Modi government’s second stint at the Centre:

‘Industry status’ to real estate: With the transformation in the way business is conducted under the reformative Real Estate (Regulation and Development) Act, 2016 (RERA) regime, it is time to recognise the role of the real estate sector as a full-fledged industry.

Deduction on the principal repayment of housing loans (Section 80 C): At present, Section 80 C of the Income Tax Act does not provide for a focussed benefit on housing. Taxpayers have numerous investment alternatives to choose from and the lack of tax benefit on the principal amount of home loans makes them put their home purchase decisions on hold, thus impacting sales. A separate annual deduction of Rs 150,000 for principal repayment will provide the much-needed fillip to opt for home loans and inadvertently push real estate sales.

Real Estate Investment Trust (REIT): While the government has taken measures to provide fiscal incentives in earlier budgets, we have seen only one REIT listing so far. The government can further push the REIT agenda by reducing the timelines of investment from three years to one year for long-term capital gains taxation; thereby ensuring larger retail investor participation.
Affordable housing: The government can enhance the eligibility criteria for the Credit Linked Subsidy Scheme (CLSS) and GST rate benefits to help a larger section of consumers in urban centres. For instance, the annual household income criteria across all consumer categories should be enhanced such that it is in sync with house prices in major urban markets like Mumbai and Delhi.

Kamal Khetan, Chairman and Managing Director, Sunteck Realty

With the Narendra Modi government back in power and Finance Minister Nirmala Sitaraman at the helm of Finance Ministry, we expect the wheels of reforms and impetus to the real estate sector to further accelerate growth of the GDP. We anticipate Modi’s vision of Housing for All by 2022 to be on the forefront in this year’s Budget, as easing pain of the real estate sector will fix many ancillary problems marring the economy currently. Generating employment among the 106 industries directly or indirectly linked to the sector, boosting the slow demand cycle are some of the immediate benefit that the economy will reap from the reforms.

Starting with the government’s focus on affordable housing, the government should revisit the nomenclature defining this segment in order to accommodate more and more people within the metropolitan regions. To make affordable housing a viable proposition, the government has to consider relaxing the unit size or the price bracket of the affordable segment. This will help bring people closer to the place of their work and within the realms of city infrastructure.

Lastly, in the previous avatar, the government has regularized the sector by introducing RERA, we expect the stable government to provide the industry status to the sector which will bring the due focus to the sector from the investor community.

Parth Mehta, Managing Director, Paradigm Realty

The truth of the realty sector is that it is impacted by three facts—increasing input cost due to the abolishment of ITC and exorbitant development premiums, excruciating liquidity crisis due to NBFC defaults, rising banking sector NPAs and piling up of unsold inventory due to weak consumer sentiment on the back of high unemployment. It is one of the worst phases for real estate as an asset class underperforming by leaps and bounds vis-à-vis others. Hence, the wish list of the sector is long which was ignored in the interim Budget due to the government’s focus on a populist Budget ahead of the election. The NBFC fiasco and overall credit crunch of the banking system had a domino effect on the viability of real estate with access to construction finance largely paused, and exorbitant rates of borrowing making project viabilities questionable.