Expectations of Real Estate Industry from budget 2018

The year 2017 was a roller coaster ride for the real estate industry as many acts and reforms were introduced in this time period. RERA, GST, demonetization and affordable housing are one of those reforms which have the direct impact on Realty Sector. Prior to those acts, Realty Sector was depriving of such moves which could curb the malpractices of developers/promoters for breaching the ethics. Hence, RERA stringent rules work accordingly to restraint culpable builders and promoters. If we move forward, everyone is geared up for budget 2018 and Realty Sector is also one of them. There are lots of expectations of Realty Sector from this budget as several revolutionary changes have been brought by RERA in last year. Foremost changes like key principles of Transparency and accountability, consumer satisfaction and right direction which usher intact profitability to homebuyers are one of them. As Realty Sector is one of the most globally recognized and second largest employers after agriculture, it contributes to GDP in a remarkable manner nonetheless certain transmutations are required for smooth functioning of it.

Industry Status

Industry can be classified in a variety of ways such as primary, secondary and tertiary. These classification systems commonly divide industries according to similar functions and markets and identify businesses producing related products. Instead of such diversion, Indian industry contributes about 7% of India’s GDP. Since the real estate sector are seeking long-term financing at lower cost, it wants to earn the status of being an “Industry”. If Realty Sector achieves this status it will make easy the process of getting loan or capital from the bank at lowest possible interest rates.

Single window clearance

There are many state ministers who are making elaborate plans to implement a single window system for industries in their states. In this process, every industry will fill one common application form for single window clearance and submit 10 copies to the office of the District Industries Centre, for obtaining clearances form other authentic government entities. Somehow Realty sector also wants this single window clearance mechanism for real estate projects. By this custom, builders intend to abstain from the tedious job of multiple approval processes. It will facilitate them to obtain permissions in a simplified, timely and rationalized manner.

Bring realty under GST with stamp duty

Realty Sector is facing several issues regarding GST and stamp duty rates. As of now, this sector is liable to pay duel amount in the form of stamp duty and Goods and Services Tax which serve no purpose instead lead to more confusion; consequently, market experts think that if the sector has to be given a boost it should be brought under GST along with stamp duty with the moderated rate and should not add to the cost of the housing or construction. It will reduce the real estate prices significantly and won’t go beyond the reach of real estate consumers.

To push REITs to realty

With the introduction by SEBI in 2014, REIT led the way for an alternate investment structure in the real estate space. The dividend tax exemption was granted to REIT one-tier structure in 2016 budget. The two-tier structure should be granted the same benefits. Furthermore, to push REITs to realty, additional reduction of the long-term capital gains holding period for REITs from 3 years to 1 year should be done. This major step will surely attract more investment in REITs.

Increase in Housing Loan Deduction

When the construction of any house property is completed, pre-construction period interest starts from that time. Pre-construction period interest is currently allowed as a deduction in 5 equal annual instalments. For self-occupied property, this interest is allowed as a deduction within the overall annual limit of Rs. 200,000. Now “what aspiring home-owners want” is ‘the entire interest deduction must be enhanced up to Rs. 300,000 per annum’. In Section 80EE, there is an affordable housing interest deduction and homeowners feel that deduction must be extended to loans taken after March 2017 and the limits must be enhanced to align with the current real estate prices, especially in metro cities.