Realty companies seek infra status for housing

In the backdrop of the ongoing liquidity crunch, the real estate industry, like any other sector, wants the government to take some measures to spur investments.

The housing industry is looking forward to the timely transmission of interest rate reductions, infrastructure status, opening up of government-owned land, more tax incentive for homebuyers, abolition of Minimum Alternate Tax (MAT), single window clearance, measures to boost investments, among others, in the upcoming Budget.

The Federation of Indian Chambers of Commerce and Industry (FICCI) delegation, while making a representation among the list of recommendations, also suggested that MAT be abolished with a simpler and lower Alternate Minimum Tax.

“In the upcoming Budget for 2019-20, the sector will be expecting further tweaks to the income tax rules, which can incentivise home buyers, including expanding the interest and principal-deduction available for home loans for first-time buyers or affordable housing,” said Shubham Jain, senior vice president & group head (corporate ratings), ICRA Ltd.

The industry also wants the government to increase budgetary allocation for the flagship schemes for expanding home ownership such as Pradhan Mantri Awas Yojana or Housing for All.

“There is a strong demand for affordable housing and office space despite the sunset clause of IT SEZ policy of March 2020. The government needs to implement specific initiatives to complement and accelerate growth through policy changes,” said Sanjay Dutt, managing director & chief executive officer, Tata Realty & Infrastructure Ltd and Tata Housing Development Company.

Over the last couple of years, one of the common demand made by the real estate sector is to grant ‘infrastructure status’ to the overall industry. At the moment, this status is limited to the affordable housing segment. Even this time, this demand has been repeated.

Amit Ruparel, managing director, Ruparel Realty, said, “We are hopeful that the finance minister grants infrastructure status to the housing sector which will be encouraging for the developers.”

Industry players see this measure as an option for them to have easier access to institutional credit at affordable costs, especially when there’s a liquidity crunch.

“The sector needs approximately Rs 35,000-40,000 crore of financial stimulus for its revival,” said Ramesh Nair, chief executive officer & country head, JLL India. “The funding shrunk substantially in FY19 due to NBFC crisis. In such a scenario, we urge the government to infuse liquidity for immediate developer lending. It will help developers to add to the required housing supply, which in turn will help the homebuyers.”

On direct benefits for the homebuyers, the industry representatives are pitching in for  more tax benefits to customers.

“While the interim Budget in February did try to woo back investors and buyers alike by offering some sops, there needs to be more direct benefits by way of reduction in income tax slabs, higher relief on housing loan rates, and an increase in the deduction limit under Section 80C from the current Rs 1.5 lakh a year. The fact that the deduction limit under Section 80C was last increased in 2014 after a hiatus of a decade strongly indicates that the government could consider revising it now. Though it will eventually be an added burden on the exchequer, it will help bring back buyers and revive the sector,” said Anuj Puri, chairman - ANAROCK Property Consultants.

The most common grievance among the property buyers is that banks and housing finance institutions are not passing on the benefits of Reserve Bank of India’s (RBI) reduced repo rate (policy rate) to loan payers.