8 Things that Real Estate Sector Expects from Union Budget 2015-16

Modi Government is all set to present the Union Budget for the financial year 2015-16 on 28 February. While the government is gearing up, the user forum of CommonFloor is witnessing lot of consumer interest regarding the upcoming budget.

‘Do you think budget 2015 will introduce interest cut on home loans?’, ‘Will this budget introduce a single tax associated with home purchase as opposed to multiple taxes?’ are few of the concerns raised by users on “Forum”. While we wait for a month to get these answers, let’s try to draw an analysis of ‘Expectations vs Reality’ in the hindsight of 2014-15 Budget.

Union Budget 2014-15

 

 

 

 

 

Union Budget 2015-16

From the real estate sector’s perspective, there are many aspects that the Union Budget should address this year. Let’s have a closer look.

Faster Clearances

Construction delays have plagued the sector for quite some time now. Thus, “expedited clearances for a larger segment of residential projects will be a key for reducing project delays,” says Anil Pharande, CMD of Pharande Spaces. He further believes that announcement that streamlines the process of obtaining clearances will go a very long way in boosting the real estate industry.

Industry Status

It is shocking how a sector that generates so much attention and revenue is still not recognized as an industry. Thus, “Industry Status has been a request that’s been put forward and ignored several times now. This will give builders access to funds at reduced interest rates and reduced collateral thereby making housing more affordable,” says Mahipal Singh Raghav, CMD, MMR Group.

Reiterating the same, Mehul Thakur – Director, Viva Homes says, “The government should also focus on ensuring a separate industry status for real estate which will help boost domestic bank lending, increase Foreign Direct Investment into the sector and ease external commercial borrowing.”

Goods and Service Tax

At present, home buyers need to pay service tax, VAT as well as stamp duty when purchasing flats. The Government should ensure the quick passage of Goods and Service Tax which will replace numerous taxes and help the consumers. Thus, “government is expected to pay attention on the implementation of key reforms like GST and other bills that would ignite the investment cycle that will work in the favour as well,” says Kushagr Ansal, Director, Ansal Housing.

Regulation of Construction Material Costs

Announcements regarding the regulation of construction material costs is also expected. “While inflation may have come down, the cost of construction has not followed suit and many developers with less capitalization have been forced to slow down or halt their projects because of this. The costs of raw materials such as cement and steel need to be brought down or an upper ceiling imposed on their prices,” adds Pharande.

Real Estate Governing Body

Setting up a Real Estate Governing body is much required. “There is a big need for an apex body which will address the concerns and look into issues from this sector,” adds Raghav.

Sharing same thoughts, Rajesh Goyal, MD, RG Group says “regulator for the sector will be able to remove the glitches pertaining.”

Rate Cut

Whole sector is atleast expecting the rates to come down so as to revive the market. “There is a lot of demand in the market which is being held hard by the affordability factor and we are pretty hopeful that the RBI will bring about a good news for interested buyers,” opines Deepak Kapoor, Director of Gulshan Homz.

Reiterating the same, Prithvi Raj Kasana, MD, Morpheus Group says, “most eyes are set on the reduction of home loan rates so as to provide the required push for the sector and this budget; the chances are very high that the new government might get it done also.”

Reduction in the cost of Property Registration

Another expectation from the Union Budget is that it will announce a reduction in the cost of property registration. “The recent hike in ready reckoner rates in Maharashtra has been a sentiment setback for the real estate sector. Stamp duty and registration costs are as high as 6% in most cases, and this needs to be reduced by a few base points to aid consumers. Alternatively, a slab-based approach should be introduced. Stamp duty falls under state government purview, but the Center can nevertheless issue a directive to reduce stamp duty costs,” says Kishor Pate, CMD – Amit Enterprises Housing Ltd.

Reduction in Lending Rates for Developers

Budget needs to do something to bring down the cost of borrowing for developers, because raising capital for development of new projects remains a huge challenge. Explaining the same, Arvind Jain, Managing Director – Pride Group says, “lending rates for real estate development currently range between 12-14%, and raising funds through other sources is even more expensive. The interest rates on lending to real estate developers should be brought down so as to help rationalize the cost of construction. This would also help in bringing down property prices.”

Will the expectations turn into reality? Well, let’s wait and watch!

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