The union budget of 2019 is approaching and like always the common man of India hopes for a budget that will impact their lives positively. The real estate industry has been under a liquid crunch for the last 12 months. Real estate industry is looking for a budget to give the required push to the unhurriedly moving sector.
When asked about the expectation of the real estate industry from the budget 2019, the industry experts expect the following changes from the Modi government’s second run at the centre:
Addressing Liquidity Crunch
The real estate sector has been under a huge financial crunch, which is impacting negatively since the distress in the NBFC’s (non-banking financial sector). The NBFC sector was the primary source of finance for the real estate developers in past half-decade. But since they are driving on low liquid capital, even addressing the prior commitments has become difficult for NBFC’s. Including the financial costs of construction, raw material and labour wages. Which results in stalling of many residential and commercial constructions across the country.
Addressing the liquidy crunch will help pump back the capital into the system – which is like the fuel in the real estate growth engine. The real estate industry is expecting the government to take some necessary measures to address the worsening NBFC’s cash flow.
Support For Affordable House
The last few budgets have taken several steps to stimulate affordable housing in the country, but the ground reality has been quite different. Despite the efforts, conversion to housing demand to actual sales has been really slow. The real estate developers are expecting some steps to address the issue in the current union budget session. Investment in infrastructure development is expected to be raised to aid developers to access funds for raising the affordable housing scheme.
The government can enhance the criterion for Pradhan Mantri’s Awas Yojana scheme. The current criteria for the Credit-Linked subsidy scheme can be revised to help benefit the larger section of the society. The current annual household income for the beneficiaries is Rs. 6 lakh, which can be revised for consumers of all categories to sync with house prices in urban communities.
Availability of land is a major hurdle in the development of real estate sector. To accomplish the goal of “Housing for All” by 2022, we need to encourage private sector investment. Provision must be made to make land available in the nominal cost to help developers bring down the input cost and attract investments. The land occupied for real estate development must be equipped with basic amenities like electricity, water, road and public transport. Together this will make residential sector affordable for a large section of the society and fuel the upcoming projects.
To Extent Input Tax Credit to Developers
The real estate developers are expecting with union budget 2019 the government will enable the real estate developers to claim the input tax credit on the services and material supplied.
On purchase of the product/materials from a registered buyer, you pay the taxes on the purchase. On selling, you collect the taxes. You deduct the tax paid during the time of purchase from the tax on sales and pay the balance amount. This mechanism is known as input tax credit. The firms are hoping that with union budget 2019, the input tax credit to be extended to developers and thus reduce the overall cost.
Tax Rationalization of the SEZ
The real estate sector is expecting further relaxation on the GST taxes and the commercial tax is expected to be cut down and extend the SEZ (Special Economic Zone) program. Instead of implementing a variable tax rate for different companies, a uniform 25%, to begin with, is overdue. There is fear among the real estate experts that the tax incentive of SEZ is planned to be withdrawn, this will seriously harm the job-creating ability of the real estate sector. With relaxation on GST, the burden on the end consumers would be reduced.
Revision On Section 80 C Of The Income Tax Act
At present, the section 80 C of the income tax act, does not provide home loans with tax benefit on the principal loan amount. This makes the homebuyers put that homebuying decision on hold, further halting the sales process of the real estate process. A separate annual deduction of Rs. 1,50,000/- for the principal repayment is expected by the real estate industry. It can aid in boosting the sales of residential properties.
Recognizing the Role Of Real Estate As A Full-fledged Industry
With the implementation of the RERA regime, (Regulation and Development Act, year 2016) there is a huge transformation in the way we conduct business in the Real Estate industry. The real estate is one of the major contributors to the Indian economy and possesses a great ability to create tremendous job opportunities every year. The real estate sector supports the export and import of many raw materials and supports a lot of small industries. Recognizing the real estate sector as a full-fledged sector would help the real estate developers to raise funds at low interest rates and cut down the overall cost of their project.
Provisions for Infrastructure Development
The union budget is expected to focus on the overall infrastructure development of the country. Especially, the tier-2 and tier-3 cities have too much scope for real estate development. Ease of doing business in these cities will surely help real estate business to expand their ventures. This will also help other ancillary industries to provide huge employment. For providing large scale housing, tax deductions to encourage private sector investment is necessary. A healthy competition between the government and private sector would help bring the prices down for the end consumer.
Real estate is a large part of the Indian economy, its high time that real estate gets its due in the budget session. The real estate developers also expect some provisions to smoothen the process of granting permission and clearances to speed up the slow real estate process. The finance minister needs to have an holistic approach towards the whole real estate development.