Having failed to impress the Union Government to acknowledge it as an industry, the real estate sector is now hoping to get an “infrastructure status for affordable housing” in this Union Budget.
Increasing tax benefits on home loans and the now three-year-old hope of industry status remain the other key points. According to industry sources, the last three Budgets have left the sector “untouched” depriving it of major benefits. Developers and investors are fishing in troubled waters with a demand slowdown and project delays on account of liquidity crisis.
“It would be very helpful if the funding can be more readily and easily available for real estate companies. Policies should also provide relief to mid and low-level consumers,” said Mayank Jalan, Managing Director, Keventer Group.
Infrastructure status to affordable housing is the focus this year. Affordable housing refers to apartments priced between Rs 10 lakh and Rs 20 lakh depending on real estate prices in the regional market.
According to RICS, a global consultancy firm, an industry status will help provide funds at lower interest rates. (Infrastructure is a priority sector lending area of banks). It would also mean developers get an income tax benefit (of 100 per cent) on their profits for 10 assessment years.
“Developers have to be incentivised for low cost housing solutions,” said Harsh Patodia, President (Bengal), Confederation of Real Estate Developers Association of India.
Real estate, market sources said, which contributed around 10 per cent to India’s (GDP) in 2010-11 has now shrunk to five per cent.
Anuj Puri, Chairman and Country Head, Jones Lang LaSalle, explains that an industry status will make it easier for real estate developers to get finance from banks.
High Interest Rates
According to Patodia, apartment price – banking, primarily, on a 12 per cent northward input cost movement – has moved up.
High interest rates – varying between 10.25 and 11.5 per cent – are a deterrent. Currently, an annual exemption of up to Rs 1 lakh is allowed on home loan interest.
“When the exemption clause was introduced apartment prices were at least 40 per cent lower. Right now, the exemption limit should be doubled,” Patodia said.
Sanjay Dutt, Executive MD (South Asia), Cushman & Wakefield, pointed out that a single window clearance system and streamlining approvals (that take between one and three years) were required.
“The recommendations of Committee of Streamlining Approval Procedures for Real Estate Projects should be implemented. It will control the costs over-runs,” he said.