The sector has been undergoing corporatisation and professionalisation and recognised as a key sector contributing to the economic development of the country.
After witnessing strong growth in 2010, the sector witnessed a slight correction in the year 2011. The downside for the sector was a weakening in demand due to the global economic scenario, a slowdown in the domestic economic conditions, escalation in input costs including interest costs and controversies over land acquisition. The current easing stance of RBI has rejuvenated sentiments in the sector. However economic conditions can be termed challenging in the short term. In the long run, urbanisation is inevitable and this will bring significant demand for real estate, and therefore the sector’s has significant growth prospects.
The year 2012 had been sluggish for the Indian economy, with the lower GDP backed by high inflation. However, the tough economic conditions have led developers to adapt quickly to the changing economic situation. While developers in the commercial segment are offering flexible leasing terms to attract occupiers, real estate companies in the residential space are concentrating on building affordable homes, thereby widening their consumer spectrum.
Another factor that can help real estate companies tide over the difficult times would be the ability to judiciously use cash by liquidating existing inventories. The government has taken initiatives such as relaxation in external commercial borrowing norms, capping subsidies as a fraction of the GDP, new manufacturing and telecom policies to revive global investor confidence. These steps are expected to generate positive results and will assist in generating investor inflows.
The government has already made efforts for revival of Indian economy by introducing FDI in multi brand retail and aviation industry, and is committed to introduce changes in the existing SEZ policy to resurrect developer interest and expand the role of the private sector in infrastructure development.
The Government is also heading towards passing of Land Bill for introducing various land reforms. The contentious land acquisition bill which was supposed to be reintroduced in Lok Sabha in December 2012, was deferred till the Budget session. The new land acquisition, resettlement and rehabilitation bill was introduced in September 2011. It was later referred to a standing committee for settling contentious clauses. They have brought about 155 amendments and had also broadened the definition of public purpose, allowing all sorts of industry. The Bill if approved will change the dynamics of real estate and housing sector in India.
Implementation of other Key economic reforms is likely to result in a gradual improvement in macro-economic conditions in the coming few months. This, coupled with a slow and gradual economic recovery in the Eurozone, is likely to result into a revival in demand in the real estate market.
At present the Real estate and housing sector is in sheer need of government support for its growth. Inspite of being recognized as key sector in development of company the sector which has still not received the status of separate industry. Budget should 2013-14 should provide a separate industry status to housing and real estate sector which will help corporates in this sector to avail funds both long term and short term finances with ease.
Awarding Infrastructure status to development of integrated townships will be a welcoming step towards development of real estate and housing sector as in the process of development of an integrated township, apart from development and construction of above establishments, various facilities such as roads, water supply, sewerage system, sanitation, water treatment, electrification, land scaping, solid waste treatment, horticulture and other civic services are also created which are handed over to respective State Governments/Local Bodies. These integrated township projects are therefore in a way at par with the BOT (Built, Operate & Transfer) projects. In order to motivate the genuine Real Estate Companies to come forward and step into promotion and development of large integrated townships in line with above arrangements to mitigate the huge shortage of housing to all class of society, it is required that Integrated township development projects be brought within the definition of infrastructure.
Also the Common man has lot of expectations from Budget 2013-14 as far as housing and real estate are concerned which is the basic need for them. Budget 2013-14 is expected to bring relief to common man by including provisions which will help them to have affordable housing and loans. Considering the high prices of dwelling units across country and particularly amongst tier 1 and 2 cities, the home loan up to Rs.25 lakhs as priority sector classification should be enhanced Rs.35 Lacs for consumer loan. The same shall boost the demand for real estate and housing and would also help individuals to satisfy their basic housing need.The recent hikes in Stamp Duty// Registration Fee / VAT / Service Tax to buyers in various states has also affected the investor sentiments and added to the cost of acquisition of the house property. Budget 2013-14 is expected to provide relief from same. The borrower should be eligible to avail 90% of the costs of purchase as loan for the first purchase and second purchase of the house, eligibility to be brought down to 80% insisting on 20% by the borrower margin. In both cases Stamp Duty, Registration, VAT, Service Tax should be included in the cost to bring relief to the borrower.
Currently a deduction upto a maximum limit of Rs. 1,50,000/- is available from taxable income towards interest on loan taken for acquisition/construction of self-occupied house property. Government in this budget session shall increase the limit to 2,50,000 per annum considering the rising interest rate and inflation.
In the case of home loan repayments, the ceiling under tax benefits is capped at Rs.1,00,000/- for principal paid. The ceiling of Rs.1,00,000/- under Section 80C is less, particularly when home loan principal repayments are clubbed with other tax saving instruments. Therefore, the deduction for principal repayment of housing loan under Sec 80C should be either increased from the existing limit of Rs.1 lakh or the principal repayments treated as a separate tax exemption entity and excluded from benefits under section 80C.
Budget 2013-14 should provide for ground rent in the sense that deduction for ground rent should be restored while computing the income under the head 'House Property'. Considering the rising value of land and proportionate ground rent in metros and other big cities, it is required that the deduction for ground rent be separately provided i.e. in addition to the overall statutory deduction of 30% available within the ambit and scope of section 24 of the Income tax Act.
Considering the need to provide affordable houses at a very fast pace in the country, new construction technology is required (such as aluminum formwork or precast technology). Currently most of these technologies are being imported and have high taxes levied on them. The customs duty/ taxes paid for importing these technologies vary in the range of 20-25%. This prohibits the use of these technologies and hence the pace of development of affordable housing. The need of the hour is to reduce these taxes for the development of housing for the EWS/LIG segment.
All the above suggestions and expectations if incorporated in the coming budget will help the industry as well as buyers, as the same will boost sales and make buying homes easier for common man. Thus we see that there are lot of expectations from budget 2013-14 from housing and real estate sector and the common man for whom satisfying his basic need of shelter has become a distant dream. Budget 2013-14 has dual responsibility of reviving the struggling housing and real estate sector and satisfying the hopes of common man.
Madhavi Thanvi
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