Budget Expectations

It’s arguably going to be the make or break Budget for the realty industry. While the first glimmer of hope came from the Budget after the Modi Govt took over the reins of power and when major policy statements came in from the Union Finance Minister Arun Jaitley. The minister’s steps coupled with the generation of overall positive sentiment expectedly enthused the real estate sector. Yet there were many areas in the r industry wish-list the FM overlooked. The Union Budget 2015 will provide him the opportunity to hit home. Among other things, it will now show how far the Government will walk its talk. Realty & More tries to gauge the expectations from the industry.

Yes, its Budget time! That time of the year when all eyes are riveted on the man with the briefcase. And none is so anxious as real estate majors when the briefcase finally gets opened on the last day of February.

When Finance Minister Arun Jaitley unveiled the maiden Union Budget of the Modi sarkar in the second week of July last year, the real estate sector perhaps for the first time got the impression of being heard. While the Modi Government generated an overall feel-good factor, a slew of measures the FM announced — directly impacting realty—gladdened hearts like never before.

The measures to revive the ailing real estate sector included a fantastic plan to develop 100 smart cities for which ?7,060 crore was allocated, relaxed norms for the entry of foreign capital and tax relief on home loans. But undoubtedly the biggest, and surely the most-awaited, was the FM’s go-ahead to the setting up of Real Estate Investment Trusts (RBIs). A successful concept internationally, REITs as an investment product were proposed to boost the liquidity situation of cash-starved developers. The announcement was uniformly seen as a measure to help ease pressure on banks to fund real estate projects.

Jaitley’s announcement regarding the relaxation of FDI limit in real estate development under the automatic route was again a clear roadmap geared to invite investments. The July Budget also modified the conditions wherein the minimum built-up area was reduced from 50,000 square metres to 20,000 square metres and the minimum capital requirement reduced from $ 10 million to $ 5 million, with a three-year lock-in period for repatriation of the original investment.

With many areas in the industry wish-list that the FM overlooked, hope has risen again and the real estate sector is optimistic that Jaitley will ensure that he carries forward his realty-friendly agenda when he presents the Union Budget 2015-16 to * Parliament on the morning of February 28.

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• Realty & More contacted a cross-section of real estate players and arrived at a conclusion that the first and foremost demand of the sector is the grant of ‘infrastructure’ and ‘industry’ status, something which couldn’t happen in the previous exercise.
• Granting ‘infrastructure’ status is expected to directly enhance availability of funding under the foreign direct investment (FDI), external commercial borrowing (ECB) and domestic bank lending routes.

 Realty & More contacted a cross-section of real estate players and arrived at a conclusion that the first and foremost demand of the sector is the grant of ‘infrastructure’ and ‘industry status, something which couldn’t happen in the previous exercise.

Real estate is similar to the infrastructure sector in that it requires large quantum of finance for purchase of land, development, construction as well as high maintenance costs. It also requires large quantum of funding over a span of a number of years. Granting ‘infrastructure’ status is expected to directly enhance availability of funding under the foreign direct investment (FDI), external commercial borrowing (EC8) and domestic bank lending routes.

The sector being the major economy-driver and the second largest employment-provider in the country, there is a dire need for showering it with industry status. Once, that’s done, it will be a priority sector for raising funds at a lower cost which will obviously transform into a reduced sale price to buyers thereby spurring demand.

• The measures to revive the ailing real estate sector included a fantastic plan to develop 100 smart cities for which T7,060 core was allocated, relaxing of norms for the entry of foreign capital and tax relief on home loans. But undoubtedly the biggest, and surely the most-awaited, was the FM’s go-ahead to the setting up of Real Estate Investment ‘Mists.
• A successful concept Internationally, REITs as an investment product were proposed to boost the liquidity situation of cash-starved developers.

Though It can’t really be part of JAW, Budget exercise, another thing which the entire industry is keenly awaiting is the passage of the Real Estate (Development and Regulation) Bill in the Budget session of Parliament. The industry’s hopes were dashed during the winter ton when the key legislation got stalled due to persistent House logjam. Realty players, particularly the serious ones, now want the Government to ensure that there is no further delay in providing a regulator for the sector. The REM Bill is a pioneering initiative to protect the interest of consumers, to promote fair play in real estate transactions and to ensure timely execution of projects.

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Streamlining of the taxation system, including Central, state and municipality taxes is another priority on The wish-list of developers. They want taxes on under-construction properties to come down and service tax eliminated altogether. With inflation under leash during the last few months, there is also a near unanimity on the demand for Interest rates corning down. Though it is the domain of the central bank, the Industry wants the FM to set a tone for this in his Budget for 2015-16.

“Currently, homebuyers need to pay service tax, VAT as well asstamp 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.”
MAHIPAL SINGH RAGHAV, CMD, MMR Group

Provision of single-window clearance for project approvals is another area which, they feel, the forthcoming Budget needs to focus on. Currently getting clearance for a project is a tedious exercise and there is also no transparency in the process. Once the long, cumbersome clearances are cut and brought down to a narrowed single window, project development can be expedited thereby leading to more supply in the market.

Towards the dying days of 2014, the Modi Government had shown its earnestness in pushing the reforms by clearing an ordinance to amend the Land Acquisition Act, 2013. Through the amendments, it has included five new categories of projects that would not require prior consent from affected families as well as the Social Impact Assessment (SIA). The business-friendly measure had obviously earned kudos from the real estate sector which has been reeling under chronic delays in land acquisition process for major projects. Now, the industry wants the Government to ensure that the positive changes in the Land Act are legislated at the earliest so that it can proceed with its mega plans.

According to Mahipal Singh Raghav, CMD of MMR Group, industry status has been a request that’s been put forward and ignored many times now. “It’s a wonder how a sector that generates so much attention and revenue is still not recognised as an industry,” he told Realty & More. “This will give builders access to funds at reduced interest rates and reduced collateral thereby making housing more affordable,” he added.

“Currently, homebuyers 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,” Raghav said. On the setting up of a real estate governing body, the MMR Group honcho said: “There is a big need for an apex body which will address the concerns and look into issues from this sector.”

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Said Deepak Kapoor, Director, Gulshan Homz: “The three most important drivers for the real estate sector this Budget will be: RBI’s interest rate cuts, decision on the land acquisition Act and execution of single-window clearance system…The whole sector is at least 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 good news for interested buyers.”

Prithvi Raj Kasana, MD, Morpheus Group, had a slightly different take. He told Realty& More: “The Government must focus on and ensure smooth operation of the Budget session this year and try to pass as many Bills as possible as the market sentiment will be determined to a large extent by how this session directs the way.” Getting industry-specific, he said: “Most eyes are set on the reduction of home loan rates so as to provide the required push for the sector and in this Budget; the chances are very high that the new government might get it done also.”

Rajesh Goyal, MD, RG Group, said a very prominent reason why people hesitate in buying property is the affordability Factor. Even after borrowing from the banks, the EMIs due to interest become heavy on the pockets. “The new Government must have this as primary aim to reduce the burden of the buyers by reducing the home loan rates. This will greatly benefit the sector as more buyers will become available in the market. At the same time, regulator for the sector will be able to remove the glitches pertaining here,” Goyal said.

“The three most important drivers for the real estate sector this Budget will be: RBI’s interest rate cuts, decision on the land acquisition Act and execution of single-window clearance system… The whole sector is at least 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 good news for interested buyers.”
DEEPAK KAPOOR, Director, Gulshan Homz

Kushagr Ansal, Director, Ansal Housing, told Realty & More: “This time we are expecting the RBI to start cutting the interest rates possibly after the Budget in first quarter which shall give them extra confidence on handling inflation expectations and stability in currency environment.” According to Ansal, there is a “greater probability of the start of a rate-cut cycle by RBI in the very first quarter this year which will definitely boost a number of sectors and progress corporate earnings from a medium to long-term perspective.” “The 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 favour as well,” he added.

“The Government must focus on and ensure smooth operation of the Budget session this year and try to pass as many Bills as possible as the market sentiment will be determined to a large extent by how this session directs the way.”
PRITHVI RAJ KASANA, MD, Morpheus Group

“This time we are expecting the RBI to start cutting the interest rates possibly after the Budget in first quarter which shall give them extra confidence on handling inflation expectations and stability in currency environment.”
KUSHAGR ANSAL, Director, Ansal Housing

Said Minder Singh, MD, Agrante Realty Ltd,: “We have a very strong belief that the upcoming Budget could be a make or break event as this would be first full Budget from the new Government which has spent good enough time at the Centre to plan out things.” He said hopes are high with the Finance Minister indicating start of second-generation reforms going forward. ‘The real estate sector will greatly benefit from this Budget if loan rates are decreased by RBI. This will create a wave of positive sentiment in the market which will accelerate the demand greatly Other important decisions to look into will be the single-window dearance system and land acquisition Bill,” Singh said.

Dhiraj Jain, Director of Mahagun Group, told Realty & More: “The industry would be keenly looking at the Union Budget with hope that the Government would do the needful to delineate a new economic vision for the country.” According to Jain, 2015 will definitely be a good year for the real estate sector on several counts with the threat of inflation having completely submerged, and borrowing rates expected to go down from the current levels. “This will encourage potential buyers planning to avail of home loans to finally take the plunge…With property prices staying stable and good deals being offered by developers, fence-sitting buyers will be further encouraged to press the’buy button,” he said.

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“The new Government must have this as primary aim to reduce the burden of the buyers by reducing the home loan rates. This will greatly benefit the sector as more buyers will become available in the market. At the same time, regulator for the sector will be able to remove the glitches pertaining here.”
RAJESH GOYAL, MD, RG Group

“A speedy clearance of mega infrastructure projects and a single-window clearance system will help in the timely completion and delivery of projects and it will create a win-win situation for the buyers, developers and the Government.”
VIDYA BASARKOD, President (Sales & Marketing), Jaypee Greens

“The real estate sector will greatly benefit from this Budget if loan rates are decreased by RBI. This will create a wave of positive sentiment in the market which will accelerate the demand greatly. Other important decisions to look into will be the single-window clearance system and land acquisition Bill.”
ARVINDER SINGH, MD, Agrante Realty

According to Jain: “Affordable housing will clearly be the flavour of the season in 2015. While the ruling Government at the Centre has clearly spelled out its intention to push for affordable housing, it is the state Governments which will need to take the implementation initiative.”

Vidya Basarkod, President (Sales & Marketing) of Jaypee Greens, is of the view that since real estate is the largest industry after agriculture and a major contributor to the economy, it should be first and foremost be given the ‘industry’ status by the government. “This will help avail funds from authorised sources and make it more streamlined and transparent.” Secondly, she said: “We would want softening of interest rates by the RBI which in turn will be very favorable for both residential and commercial real estate.” The laypee Greens spokesperson concluded by saying: “A speedy clearance of mega infrastructure projects and a single-window clearance system will help in the timely completion and delivery of projects and it will create a win-win situation for the buyers, developers and the government.”

“Affordable housing will clearly be the flavour of the season in 2015. While the ruling Government at the Centre has clearly spelled out its intention to push for affordable housing, it is the state governments which will need to take the implementation initiative.”
DHIRAJ JAIN, Director, Mahagun Group

“The Union Budget 20 14-1 S paid significant attention to real estate sector. We expect Budget 2015-16 will look into REITs and investments which are yet to begin because of the unviable tax structure. Even the long-term capital gains should be exempted for sponsors of REITs. Even for people who avail home loans, this will be a noteworthy effort for the sector.”
ANIL MITHAS, CMD, Unnati Fortune Group

“Projects within Rs 90 lakh in the NCR and major metros should be categorised as affordable housing. Or, units up to a size of 1200 sq ft built-up/carpet area should be treated as affordable housing.”
MANISH AGARWAL, MD, Satya Group

“We at RE/MAX strongly believe that the Government should tweak tax norms to make REITs more attractive and flexible which will further lead to a big push to investments in the sector.”
SAM CHOPRA, Chairman, RE/MAX India

Anil Mithas of Unnati Fortune Group told Realty & More: “The Union Budget 2014-15 paid significant attention to real estate sector. We expect Budget 2015-16 will look into REITs and investments which are yet to begin because of the unviable tax structure. Even the long-term capital gains should be exempted for sponsors of REITs.

Even for people who avail home loans, this will be a noteworthy effort for the sector.”Mithas said a major demand of the real estate sector is industry recognition. “Official recognition will eliminate many of the problems faced by the industry,” he said. “In order to reduce delays in projects, developers expect a single- window system to be introduced for all clearances. Developers are also looking forward to some concessions for affordable housing projects.”

• Another thing which the entire industry is keenly awaiting is the passage of the Real Estate (Development and Regulation) Bill in the Budget session of Parliament. The RERA Bill is a pioneering initiative to protect the interest of consumers, to promote fair play in real estate transactions and to ensure timely execution of projects.
• With inflation under leash during the last few months, there is also a near unanimity on the demand for interest rates coming down.
• Provision of single-window clearance for project approvals is another area which, they feel, the forthcoming Budget needs to focus on.

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Industry status to real estate sector tops the wish-list of Satya Group MD Manish Agarwal as well. Apart from that, he said: “Projects within no lath in the NCR and major metros should be categorised as affordable housing. Or, units up to a size of 1200 sq ft built-up/carpet area should be treated as affordable housing.” Agarwal also wants tax rebate under Section 80-IA to be extended to the industry for building houses of 1,000 sq ft carpet area. His other demands for the industry are additional rebate on interest paid on housing loans to individuals, additional interest rebate to corporates buying houses for their employees to promote rental housing and special incentive to corporates to provide for rental housing. He also wants introduction of new technology and environmentally sustainable tech in construction to be encouraged by incentivising the same.

Pramod Agarwal, Executive Director, Microtek Infrastructures, cryptically summed up his wish-list for the upcoming Budget as increased wealth tax limit, increased 80-C limit (tax benefit on home loan repayment amount), decreased home loan interest rates, increased tax-benefit on interest on home loans and industry status to the real estate sector.

“My wish-list for the upcoming Budget includes increased wealth tax limit, increased 80-C limit (tax benefit on home loan repayment amount), decreased home loan interest rates, increased tax-benefit on interest on home loans and industry status to the real estate sector”. PRAMOD AGARWAL, Executive Director, Microtek Infrastructures

“We at RE/MAX strongly believe that the Government should tweak tax norms to make REITs more attractive and flexible which further will lead to a big push to investments in the sector,” said Sam Chopra, chairman, RE/MAX India, regarding his expectations from the Union Budget. He said REITs will be beneficial for both the investors and the real estate sector as the move will support the sector in reducing its high levels of debt.

Another expectation he has is the lowering of the interest rates to boost consumers housing demand. “With this we can also look up to extending of investment allowance for infra sector and exempting infrastructure projects from the minimum alternate tax (MAT)”, he told Realty & More.

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