Real estate sector is considered as one of the
mainstays of the Indian economy and correctly so; as it contributes at an
average of 6 percent to the nation’s Gross Domestic Product (GDP) each year,
and employs over 50 million people making it as the second biggest employer in
the country, after the agriculture sector. Being an end user for over 30 allied
industries and sectors, a lot is always expected from it. Over the past few
decades, this sector has developed leaps and bounds, and has attracted a hefty
amount of Foreign Direct Investment (FDI) as well. In the year 2015 itself, the
sector brought an inflow close to $35 billion in FDI. Lakhs of crores of Rupees
has been already spent on the infrastructure front as well that serves as the
backbone for the realty sector, with much more announced and to be allocated.
Therefore, this sector being extremely significant for the country’s growth
requires a strong support through the government’s initiatives and decisions
and hence, this year’s Union Budget, which is to be declared on 29th February,
2016 will play the most vital role in shaping up the upcoming years for the
real estate sector.
2015 saw a very different behaviour in the real
estate sector with end users becoming much prominent than the investors, who
were looking for other opportunities to invest into. With interest rates coming
down due to reduced repo rates, falling property prices, stabilizing cost of
raw materials attached with economic revival and controlled inflation rate had
pulled the buyers back in the market. All eyes will be on Mr. Jaitley to see
what he has in store for the sector this budget session, as this will be the
second comprehensive budget by this government who has been featuring
infrastructure and real estate as the core behind this country’s unprecedented
growth.
What this Sector craves for?
Ø Status
of being an Industry – This has been the demand of this sector for over several
years now. How does the attainment of industry status help? Amongst various
other reasons, it’ll give developers an access to funds at much reduced
interest rates and diminished insurance thereby creating housing more
affordable which will support this government’s current motto of Housing for
all.
Ø Removal
of multiple taxes – Presently, home buyers need to pay taxes indirectly in the
form of service tax and VAT. Apart from this, stamp duty is also paid while
registering the flats. Government needs to ensure the quick passage of Goods
and Service Tax (GST) that went for rounds and rounds in the last two sessions
of the parliament and never made out on a positive note. GST will help in
substituting numerous taxes with a single tax that will also help in bringing
transparency.
Ø Governing
body for the sector – This is the real need of the hour as otherwise end users
in this sector will become dried out of the market, because of rising
fraudulent cases and delay in delivery of units. This sector is currently
valued at over $50 billion and is projected to grow to over $200 billion by
2020. There is a big need for an apex body which will address the concerns of
the customers and look into issues of this sector in order to enhance the much
needed limpidity.
Ø Encourage
FII participation in infrastructure - India is still an infrastructure lacking
country and requires huge investments to help bridge this gap. This Union
Budget should make more provisions to enhance foreign investors’ contribution
in this sector.
Ø Fully
functional REITs and REMF – Presence of REITs will allow a low entry level and
are expected to provide a safe and diversified investment option at much
reduced risk; all under proficient management that will ensure the highest
return on investment. This new investment vehicle is categorized by its
investment in real estate assets as well as limited liability for the unit
holders. On the other hand, REMF will help in fulfilment of three major
purposes; raising of funds for the expansion of retail businesses, to provide
required capital for the development of retail infrastructure and to enhance
the quality of housing projects.
Mr. Rajesh Goyal, Vice President
CREDAI-Western U.P. & MD, RG Group
The Indian Real Estate Sector has been anticipating
Industry status for long now. A sector that generates massive revenue and
employment deserves extra attention from the government. Time and again we
learn about the urgency to build 2 crore affordable houses. It can be achieved
in due time only with the help of Industry status which will give builders’
access to funds at reduced interest rates and reduced collateral thereby making
housing more affordable, thus assisting the cause of Housing for all as well.
Mr. Rakesh Yadav, Chairman, Antriksh
India
A major miss of the last year was GST whose
implementation will basically work on three major elements for this sector; simplification
of tax structure, reduction in construction costs and better transparency.
Speaking about its contribution post acceptance, we are predicting a nationwide
realty sector growth by almost 15-20 percent than projected in the course of
next 5-7 years. There will be a quick reaction towards the sector by its
customers as demand is bound to increase due to reducing costs and improving
transparency in the sector that has been the hurdle making this sector suffer
for long now.
Mr. Vikas Bhasin, MD, Saya Group
It is high time that SEBI had approved the structure
of REITs in the country but it is still in lurks over its implementation. This
budget session would be crucial keeping this in mind, however few changes would
be much appreciated like reducing on the current minimum stock size and minimum
investment amount of Rs. 1 lakh and Rs. 2 lakh respectively. Also, provisions
should be brought in to allow investments in residential real estate as well,
which till now is limited to commercial real estate only. Simultaneously, Real
Estate Mutual Funds also need to be picked on a serious note so that money can
be equally channelled into REITs shares and infra related shares.
Mr. Sushant Muttreja, CMD, Cosmic Group
No doubt the real estate sector is one with very high
returns but the period of investment in the real estate has to be judged over a
period of 8-10 years, since it is a long term investment. The sector is very
confident that the Budget 2016-17 will bring in Real estate regulatory bill,
GST bill, Land Acquisition Bill and industry status to the sector. We need a
lot of positive sentiment to usher a new era where real estate as always will
contribute aggressively to the overall growth.
What customers’ desire
v Reduction
in interest rates – Even with 125 basis points reduction and repeated nods by
the RBI last year, banks have not passed on the complete benefit to the
customers. This has led to higher EMIs than expected which is keeping back the
actual demand.
v Correction
in cost of registration – Stamp duty and Registration costs amount to around 6
percent in most places, which is still quite high. Decreasing the registration
cost by a few basis points would greatly reduce the burden over the end
customers. Alternative approach would be to adopt a slab based approach towards
the registration fee. However, stamp duty mainly comes under the jurisdiction
of the State Government; an instruction from the centre to reduce the cost
would definitely help.
v The
right to know – In this sector, customers often complain about not knowing the
development progress on their units or if there are any changes made, they
aren’t notified, and in certain cases, even worse; builders making exit with
the hard earned money of the customers. This transparency has become extremely
significant which can only be addressed through the passage of RERA.
Mr. Deepak Kapoor, President
CREDAI-Western U.P. & Director, Gulshan Homz
The three most important drivers for the real estate
sector this budget will be; implementation of RERA to help curb the corruption
in this sector and enhance transparency for the customers, execution of single
window clearance system across the country to assist in timely commencement and
delivery of the projects and proper passage of GST, to avoid multiplication of
taxes that confuse most customers. Apart from these, industry status has been
in the request queue for long now and must become real this time so as to help
the developer pass on direct benefits to the customers through reduced cost of
units.
Mr. Ashok Gupta, CMD, Ajnara India Ltd.
The government must focus on and ensure smooth
operation of the budget session this year and try to pass as many bills as
possible as the market sentiments will be determined to a large extent by how
this session directs the course for this sector. Most eyes are set on the
misses of last year such as RERA, GST, Land Acquisition Bill and Industry
Status. These are extremely important for this sector to grow and perform, and
this government has left no stones unturned in announcing mega plans for the
future that will be directly affected by the implementation of aforementioned
bills.
Mr. Kushagr Ansal, Director, Ansal
Housing
At present, the income earned from renting is
treated as normal taxable income. This Union Budget, the government needs to
provide tax incentives for renting out of residential properties. Providing tax
breaks specific to rental income will provide a noteworthy boost to rental
housing segment which will help increase rental supply in the metros
especially. At the same time, developers have been campaigning for a faster
project approval process for timely completion of projects. Faster approvals
will push up the supply pipeline, lower prices and also ensure that this sector
remains practical as a business. The Budget must also ensure that construction
quality norms are not compromised in the process and that faster approvals do
not result in support infrastructure failure in new grounds being developed.
Mr. Rupesh Gupta, Director, JM Housing
The country’s real estate stands in anticipation of
a lot from this year’s annual budget. There are few pointers though which need
immediate attention and that would include the awarding of much awaited
industry status and allowing single window clearance for approvals. Industry
status once accorded will mean cheaper loans for developers and work flow
becoming much more realistic. Single window clearances will mean timely
approvals and allow developers to avoid unnecessary delays in their promises of
delivery time frames.
Developers’ wishlist
·
Decrease the lending rates – Raising
capital is a mammoth task for developers. The interest rate for builders from a
bank can go as tall as 24 percent and on an average is about 22 percent and in
fact; raising capital from other sources is more expensive than this. Reducing
this rate of interest for builders will help in decreasing the cost of
construction and in turn, bring down the cost of a unit for the customers.
·
Prolonged approval system – Developers
need to get over 30 approvals from various Government officials to get a
project rolling. Delay in getting those clearances is one of the prime reasons
for delays in projects. Any effort towards reducing this, increasing
transparency and rationalizing the process of getting clearances will positively
impact the industry.
·
Regulating the cost of raw materials – A
sudden rise in the cost of construction of raw materials has enforced many
builders to pause their projects in many parts of South India and gaining
momentum in the Northern parts as well. Although, the cost of cement and steel
has decreased by almost 30 percent over the past few years, but prices of few
other materials have doubled over the last few years. The Government must
regulate these prices for at least key raw materials like cement, iron,
concrete, etc. by putting upper caps on their prices.
Mr. Sudeep Agrawal, MD, Shri Group
As India is gearing up for major infra revamp and
Make in India, the challenge greatly lies on the manufacturing industry. Over
the next few decades, the construction industry will witness a massive growth
globally and hence, raw materials such as cement, brick, steel, concrete, etc.
will be used in abundance. Therefore, we need to create a perfect balance
between the demand and supply along with appropriate consideration for the
environment. This immensely depends upon the costs of raw materials used during
construction process such as cement, iron, etc. This budget, the government
needs to regulate the prices of these materials so as to curtail rising
property prices.
Mr. Ankit Aggarwal, CMD, Devika Group
Markets are keen and waiting eagerly for the Union
Budget 2016-17 to be presented on 29th February. We have a very strong belief
that the upcoming budget could be a make or break event; as this would be the
second full budget from the government which has now spent good enough time at
the centre to plan out things, supported with huge announcements. Hopes are
high with the Finance Minister indicating start of second-generation reforms
going forward. Important decisions to look into will be the single window
clearance system, decrease in lending rates for the developers and most
importantly, Industry Status which itself will help in making funds available
at much reduced rates.
Mr. Rahul Chamola, MD, One Leaf Group
The real estate sector has a long list of
expectations; as this sector alone contributes to about 6 percent to the
nation’s GDP. Biggest challenges for the Government are infrastructure,
decreasing the lending rates for developers, regulating prices of raw materials
across the nation, etc. Further, we expect that the upcoming budget should give
developers access to funds at reduced interest rates and eliminate multiple
taxes; thereby creating housing more affordable and in turn will help reduce
the burden on the customers. Single window clearance and Industry Status will
bring cheers in the developers’ fraternity and bring desired results for the
customers.
Mr. Vikas Khurana, Co-Founder, HomzCart
2015 has been a year full of promises by the
government that will require key reforms to move forward. For instance, the
Smart Cities mission will require next level of infrastructure, the presence of
which is possible through acquiring huge land banks. This will need quick
implementation of Land Acquisition Bill. Similarly, Housing for all by 2022
initiative will remain a dream if Single window clearance is not adopted at the
earliest. Also, in order to keep this sector’s contribution maximum towards
GDP, balance between demand and supply along with proper transparency is
necessary, which brings our focus back to RERA’s execution. Finally, to bring
down the cost of units, Industry Status will allow acquisition of funds at much
lowered cost which will directly benefit the customers through reduced cost of
units. Thus, this Budget is extremely crucial in terms of future development of
the nation’s realty sector we expect government’s full support.
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