Hope Floats

By Pankaj Kumar Jain, Managing Director, KW Group

Real estate sector is in dire need of budget stimulus to fight the slowing growth. It needs such provisions in the upcoming budget that immediately bring relief to all the industry stakeholders. Apart from easier project financing avenues to the announcements towards boosting infrastructure across the regions, the industry is expecting the budget to also increase the income tax deduction limit on home loan to boost real estate demand. 

In the backdrop of sluggish growth and persistent low demand scenario, the real estate sector is very optimistic about the upcoming budget and hopes it will include provisions to provide immediate relief to all the industry stakeholders.  While the entire real estate sector is undergoing stagnation phase due to a clear lack of buyers’ movement in the market, it’s time to generate demand to save the industry from falling into a vicious circle of negative growth. Moreover, due to unavailability of easier project financing avenues, all industry players are facing a lot of difficulties while planning to launch any new project.

While in the last couple of budgets most of the expectations raised by the industry remained unfulfilled and there have been deep disappointments over various long awaited policy issues, we have a lot of expectations riding on the upcoming budget. We expect the upcoming budget to hold provisions to restore the faith of the stakeholders. The budget must include the long-awaited measures like introduction of dedicated Single Window Clearance system for speedy clearances and approvals of the projects. For the homebuyers, we expect the budget will include additional income tax deductions at least for the customers buying housing units under affordable segment. We suggest the upcoming budget must raise income tax deduction limit on home loan and the value limit of affordable house must be enhanced from current Rs 45 lakh to at least 60 lakh.

The current input tax mechanism under GST has been an area of major concern for the real estate developers engaged in the construction of affordable housing projects. Hence, we also look forward to some encouraging announcements on this front in the upcoming budget. We also expect the upcoming budget should allocate funds for creating well-equipped infrastructure across the country. Lack of infrastructure is a major cause of worry for the real estate sector operating in tier-II-III cities. Hence, we hope the honourable finance minister will surely announce some measures in this budget to accelerate infrastructure development. Such initiatives will also provide affordable land parcels for budget housing development.  We are equally hopeful for the government to announce a specific mechanism to regulate the cost of key raw materials like cement and steel in the upcoming budget. 

Moreover, the entire real estate sector should immediately be granted industry status to make it eligible to avail finances from banks on lower interest rates. Such an arrangement will be truly helpful in addressing the liquidity issues of the industry, besides helping in completion of various stalled projects. The increased bank funding will definitely turn out as a much needed encouragement for the developers struggling to deliver affordable housing projects to meet their commitments to support PM Modi’s ambitious Housing For All by 2022 initiative.

Another long awaited demand of the industry is Subsuming of stamp duty within the ambit of in GST. If GST includes stamp duty there will be an immediate increase in demand, at least in the emerging real estate markets across the country. We need a large-scale budget stimulus to fight slowing growth. Needless to say, the upcoming budget has presented an opportunity for the government to look favourably on the plight of the real estate sector which has assumed greater significance as second largest employer after agriculture. For the time being, we all have kept our fingers crossed in expectation of the platter of positive announcement that the upcoming budget may bring for the growth of real estate sector. In a nutshell, the honourable finance minister must pay attention to increasing the disposable income of the consumers while for the industry she must bring provisions to make available easy financing to expedite project development. In a nutshell, we expect the upcoming budget to inject fresh wave of cheer into real estate sector that’s currently facing gloomy scenario.