Realty sector seeks lower finance costs, faster clearances ...

Feb 11, 2013, 01:08PM IST

The country?s real estate players are hoping that the finance minister?s budget provisions, to be announced on February 28, will bring down the costs of finance for the construction sector, which they insist will play a major role in offering lower rates for their product.

Also on the real estate developers? wishlist is a sustained structure of governance for the sector and introduction of methods to reduce the time taken to obtain the permissions and clearances for a project. A delay in the completion of a project, mainly due to delayed clearances, always leads to cost escalation and higher prices for consumers, they argue.

Lalit Kumar Jain, national president of the Confederation of Real Estate Developers? Associations of India (Credai), said the finance minister should allow tax exemption for inputs used in construction of small houses, of under 60 sq m carpet area. Special housing zones on the lines of Special Economic Zones could also be created, with tax exemptions for constructing 45 sq m houses for low income groups and 30 sq m houses for the economically weaker sections, Jain said.

He said, ?Widespread tax incentives can be leveraged to make the real estate sector the new growth engine of the economy?It is high time that the government took a pragmatic and practical look at the real estate sector and took steps that help the industry in particular and the economy in general.? Interest rates for housing loans should be cut to 7.5%, he added.

Credai suggested that a Real Estate Investment Trust be formed and called for special rental housing projects under the affordable segment, treating the expenditure as capital investment for long-term capital gains, exemption from income tax, service tax, value added tax and stamp duty for rental housing. Even the rental income from these projects must be exempt from income tax as there are substantial indirect benefits, the apex body has said.

Anuj Puri, chairman and country head for real estate advisory company Jones Lang LaSalle India, said considering that the budget is expected to be a populist one ahead of the 2014 polls, addressing the compromised GDP and skyrocketing inflation must be given the highest priority.

Puri said the budget needs to increase infrastructure spending in urban areas with a view to unlock the value of neglected and hidden land assets in suburban and peripheral districts. This will enable a more holistic growth for the real estate markets in our over-burdened metros and allow the demand for housing to spread over a larger canvas. The increased demand in peripheral locations where infrastructure has made the real estate markets more viable will also help bring down prices in the central areas, he said.

?The country?s real estate industry contributes approximately 5% to the GDP. Moreover, the real estate sector has grown significantly over the past decade, with tangible transformation in quality and business standards. However, due to lack of regulations and effective policies, the sector is experiencing many challenges. The budget must consider the fact that the Indian real estate sector generates countless jobs across its various verticals. By granting it industry status, the government would enable the sector to access debt-lending at better interest rates and reduced collateral values,? Puri said.

The government should come up with simple and effective polices that will ease real estate development approval procedures. Obtaining the 57-odd permissions to begin construction of a project can take up to two years. During this time, the cost of acquisition or even just holding the land for projects goes up. Lack of single-window clearance mechanisms causes project delays, which prove to be expensive to both developers and end users, Puri added.

The firm?s managing director (Pune) Sanjay Bajaj said the budget should provide the real estate sector with elaborate provisions for external commercial borrowings for low-cost housing, tangible tax relief for individuals and greater investment in infrastructure. ?An amplification of concessions for low-cost housing loans would have a significant bearing on the Pune real estate market. Unlike Mumbai, budget housing is still a very real concept in this city. Incentivising the development and purchase of affordable housing can make a big difference here,? Bajaj said.

Source: The Times of India, Pune

Source: http://content.magicbricks.com/realty-sector-seeks-lower-finance-costs-faster-clearances/

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