‘Realty sector needs rejig in tax structure to accelerate growth’

The country’s real estate sector has seen 35-40 per cent lower sales during the year as of October-end and is passing though some challenging times due to rapid changes in the regulatory environment.

“While it is witness to a phase of consolidation, this is the best time to buy properties as the prices are ruling low,” according to Niranjan Hiranandani, President, National Real Estate Development Council (Naredco).

Regulatory hurdles Hiranandani told BusinessLine , “Last 12 months have been particularly challenging for the real estate sector due to a number of macro economic headwinds. Demonetisation followed by RERA, Bankruptcy and Insolvency Code and the Goods and Services Tax have come in as a tsunami quite tough to handle.”

Even before sector players and people could adjust, the regulations coming one after the other, have had significant impact on the buyers' sentiment. Even the developers had a tough time tuning their back-end ERP systems. This resulted in a lower growth of about 35-40 per cent, he said.

The GST regime, which was largely expected to bring down the overall costs for the end consumer, has in fact been inflationary. It added about 3.5 to 5 per cent to the overall costs for the consumer. Together with other imposts, the overall tax incidence has been quite high. This is further complicated due to Stamp Duty.

Plea to govt “The government has to look at this aspect closely and make some correction so that the consumer will benefit. We are in discussions. Once this happens, the enquires will actually translate into sales and accelerate the growth of the real estate sector, which is a big contributor to the economy and growth, while also being a major employer,” he said.

The Narendra Modi government has set an ambitious target of housing for all by 2022. If this has to be achieved, the sector has to grow at 30 to 50 per cent CAGR. This can only be achieved if the problems are solved, he said.

Lately, there has been sharp focus on the affordable housing segment. This can grow with the support of both the Centre and the State governments, where PPP (public, private partnership) mode projects will gradually become popular with the governments providing the land. This will ensure keeping prices under check, he said.

Lower demand for loans “If the recent trends are factored in, the size of loans taken from banks for housing sector is coming down. This indicates that the consumers are looking at low-cost housing and the ticket size of loans is coming down,” he explained.

“As per our estimates, in the past three months or so, thing are looking up in the western and southern region, but the situation is quite bleak in the NCR, where sales have come down significantly. There are also concerns about insolvency issues,” he said.

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