Through a hailstorm of bouquets, brickbats, controversies and triumphs, the Indian real estate sector has always been one of the mainstays of the country’s economy. At some level, every Indian is connected with it; in some way or the other, it affects every citizen of this country.
The same could be said for the stock market, since a telling segment of the population is either trading or indirectly invested in it via insurance policies and mutual funds. However, the real estate sector has a direct bearing on every Indian’s life – be it from the point of view of housing, workplace, business premises, shopping or investment.
It is time that the Government takes practical cognizance of the vitally important role the real estate sector plays in the Indian economy. The Union Budget rolls around every year, and every year it presents the Government with an opportunity to iron out the more glaring inconsistencies and introduce the most obviously called-for reforms, and thereby either consolidate or strengthen its stance as a champion of economic growth and progress. Every year, the spokespersons for the Indian real estate sector petition for reforms that will give the sector the required forward momentum.
While we realize the limitations, reservations and uncertainties that have been following the wake of the property market, we know that the fundamentals that drive this industry in India are time-tested, resilient and extremely robust. Encouraged, as always, by our continued optimism, we once again hope that the Union Budget for 2011-2012 will give Indian Real Estate the break it deserves. In tangible terms, the reforms that would have the most beneficial effect would include:
More sops for affordable housing under ‘Housing For All’
Last year, housing loans under INR 10 lakh were given an interest rate cut of 1%. We need similar measures in the new budget. Special Residential Zones (SRZs) should be taken off the drawing board and finally implemented, and developers who focus on ultra-low-cost housing, either through SRZs or otherwise, should be given more sops. Also, we ask for an increase in the cap on tax deduction available on housing loans.
More relaxations for FDI in retail
Provide for 100% FDI in multi-brand retailing. This would ensure substantial growth in the food processing and textile sectors via the resultant linkage effects of a modernized, globalized retail trade. The employment generation for Indian youth would be enormous, and Indian retail will benefit from juxtaposition with market-savvy international retail corporations, and would learn to adopt their best management practices.
Simplify Taxation in the Real Estate sector
Introduce Goods and Services Tax (GST) and include the Real Estate sector under the ambit of this single tax regime. This will simplify transaction costs (which currently include stamp duty) and give developers a set-off or credit on the taxes paid on construction material and services. Also, create a nation-wide, unified taxation system, which currently differs between states
Increase forward momentum towards REMFs and REITs
The commercial office market seems to have bottomed out and now presents excellent options for investing into yield assets. This factor should logically catalyze the formation of REITs.
Relax the deadlines proposed under Revised DTC for Special Economic Zones (SEZs)
Under the revised DTC, SEZs have to be notified before March 2012 and become operational before March 2014 to be able to avail of the tax benefits. The Union Budget should consider a relaxation of this requirement to provide greater impetus to the demand for commercial real estate from the IT and manufacturing industries.
Create ‘Real Estate Regulatory Authority (RERA)’ for bringing more transparency. Enact the Model Real Estate (Regulations of Development) Act.
