BUDGET WISHLIST: Real estate players seek priority-sector lending rates

In the run-up to Union Budget for 2015-16, Business Standard looks at major developments and industry expectations in key sectors of the economy

REAL ESTATE SECTOR: KEY DEVELOPMENTS 
 

• Smart cities: Proposal to develop 100 of those, to offer sustainable economic development and employment opportunity to a wider section of people, regardless of their level of education, skills or income levels
   
• Reits: The Securities & Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014, notified. Reits will facilitate tapping of cash flow in the Indian economy, and help smaller investors access income-generating real estate assets

• FDI: Relaxation in conditions for foreign direct investment in the construction sector. Some of these relaxed rules include reducing minimum built-up area and capital requirement for the projects receiving FDI

• The Real Estate (Regulation and Development) Bill, 2011: Yet to receive clearance from the Cabinet, the Bill proposes to promote transparency and accountability in the sector. The Cabinet is deliberating on revising the long-delayed Bill and having a regulator for the real estate sector.

KEY ISSUES 

• Opaque regulatory environment
• Tight leash on funding by banks
• Variation in stamp duty levied by various states
• Lack of clear land titles, absence of title insurance and procedural difficulties in obtaining clear land titles
• Little progress on plan to revive SEZs

OUTLOOK

According to ‘Emerging Trends in Real Estate Asia Pacific 2015’, jointly published by PwC and Urban Land Institute, there has been a change in sentiment of investors, both domestic and international, after a new took charge at the Centre last year. The growing confidence is likely to create an upturn in demand for Indian real estate.

SHRINKING SHARE IN FDI PIE | Create infographics

CEO BYTE

Brotin Banerjee, MD & CEO Tata Housing

“Given the govt’s targets for smart cities and affordable housing, and a shift in consumer preference for integrated townships, there is a case for giving infra status to the segment. If developers get priority-sector lending rates, they will be incentivised to take on projects for providing necessary civic amenities like road connectivity, waste management, electricity and water connections. To encourage demand, the deduction available for interest on housing loans should be increased from Rs 2 lakh to Rs 3 lakh a year”

EXPERT VIEW
 

Business Standard had invited readers’ queries on the Budget for 2015-16. A PwC expert answers key questions

Bhairav Dalal, Associate Director, PwC India

What are the expectations for the real estate sector? — Krishnakanth Madamshetti

While there are a lot of expectations on direct tax sops for the real estate sector, at the very least, we expect certain clarification on the taxation regime of Reits, to eliminate hurdles in implementation of the structure and provide parity of taxation regime between various investments on Indian listed platforms. As expressed in the previous Budget, to revive interest in special economic zones, the government could reinstate the minimum alternate tax (MAT) exemption provided to SEZ developers and units. Exemption from levy of dividend distribution tax (DDT) could also be reinstated for SEZ developers. Further, certain measures to make liquidity available to the sector are also expected.

What is the expected amount of Budget that might be allocated to the mission of ‘houses for all by 2022’? Will the Budget benefit the real estate sector? — Bharath Chandra
 

In the previous Budget, the government had allocated Rs 4,000 crore by way of cheaper credit for affordable housing for the urban poor/economically weaker sections/low-income groups, and about Rs 7,000 crore for the smart cities initiative. While it is difficult to estimate the exact Budget allocation for the coming year, it is expected certain fiscal stimulus or incentive will be provided to make the mission a reality. We expect some announcements to kick-start development of smart cities.