RUN-UP TO THE BUDGET: REALTY. Realty sector seeks steps to cut housing costs

The real estate sector is hoping that the Budget will spell out measures that bring down housing costs and improve the capacity of people to buy property. It also wants better access to funding and faster clearances.

It wants one of its long-pending demands—that of infrastructure status— to be fulfilled so that companies can get long-term funds at lower rates.

With the Centre promising to provide housing for all, bringing housing within the reach of the poor and the middle-class segments becomes necessary, says C Shekar Reddy, National President, Confederation of Real Estate Developers Associations of India.

Incentives should be targeted at first-time house buyers as it will help drive demand. Over 95 per cent of the estimated need for housing is concentrated among the economically weaker section and the low- and middle-income group. This calls for bringing down interest rates on home loans and extending better interest subsidy schemes for borrowers.

Incentives to builders should bring down costs. Service tax should be waived for affordable housing, and relaxing or doing away with constraining regulations like floor space index and floor area ratio will help increase supply, Reddy said. In Hyderabad, for instance, this limit on built-up area has been removed. Instead, buildings taller than five floors pay an impact fee, which is utilised for infrastructure development.

According to Niranjan Hiranandani, Managing Director, Hiranandani Constructions, granting infrastructure status and treating it on par with other physical infrastructure creation is essential in the government’s plan to develop smart cities and provide affordable housing. Projects such as these need long-term, low-cost funds.

How can you provide affordable housing with land costs and input costs going up continuously?

The option is to provide incentives. Tax benefits such as 80Ib should be restored, service tax must go. Service tax on construction adds 5 per cent to housing cost for those dependent on home loans and the middle class which opts to buy houses early in the project phase.

The rich who can buy a ready-to-move-in house do not pay service tax.

Tax benefits for home loans and standard deduction for housing should be provided, Hiranandani said. The tax structure on real estate investment trusts should be corrected to allow for pass-through.

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