BUDGET 2018

Realty sector needs investment flexibility to spur growth

india-real-estate-reuters [File] Representative image | Reuters

As we move towards the last full budget of the NDA government, Finance Minister Arun Jaitley has a difficult task at hand, with practically all sectors expecting something positive in the Budget, when viewed from their perspective. Real estate, like other sectors of the economy, is facing challenging times. For India’s real estate, 2018 comes with lots of hope – the regulatory changes that were made over the past few months have begun showing positive impact as regards higher levels of transparency and enhanced confidence on part of customers, and the quantum of transactions are slowly increasing.

For real estate’s corporate sector, the first thought is that hopefully, the Finance Minister will bring out a Budget that is positive for real estate. Having said that, we come to what is best described as taking things to the next level: the Narendra Modi-led NDA Government has ‘walked the talk” on some positive measures in the previous budgets, and Indian real estate would look upon the forthcoming budget to help take things to the next level – so that industry-specific initiatives like ‘100 Smart Cities’ as also ‘Housing for All by 2022’ become a reality faster – which impacts business for the industry, as also will ensure that for India’s home seekers, their ‘dream homes’ become a reality.

niranjan-hiranandani Niranjan Hiranandani, President, NAREDCO

The corporates in real estate sector realises their responsibility, being the second largest contributor to the economy (as per the report released by IBEF), given that the recent regulatory framework set up aims at better transparency and accountability, effectively allowing only those players who do business with integrity to sail through. Against this backdrop, the Union Budget 2018-19 will be looked upon for reforms in the tax arena in the form of tax incentives and rationalisation of certain provisions of the Income Tax Act, to foster better growth and help reduce the demand-supply gap in the real estate market. Related to this is the aspect of giving industry status to the full real estate sector.

While economic statistics show that the real estate sector contributes to over 15 per cent of India’s GDP directly or indirectly, industry players have been stressing on the need for granting ‘industry status’ for a long time. In its absence, developers are forced to avail of credit at high-interest rates, which in turn, gets impacted by delays in construction due to long approval process – which leads to an increase in the final cost of homes, negatively impacting the end consumer as also impacting the real estate sector's corporates. Ideally, the budget should bring the entire real estate sector under the ambit of ‘industry status’, instead of restricting it to only the affordable housing segment.

From an industry perspective, ensuring the smooth functioning of public-private partnership (PPP) model will require not just ‘ease of doing business’ but also enhanced transparency in taxation. From a corporate perspective, the importance of reduction in the cascading of taxes across the country, when GST is bringing a single rate of taxation on real estate, cannot be emphasized enough. Transformational initiatives should go a long way in ensuring that the upcoming budget is the right one for India, Indian real estate and corporates are an integral part of the economic ecology. Also, tweaking the current policies beyond new policy formation will be crucial to revitalise the business cobweb in the economic system. Ease of doing business in terms of funding, approvals and sanctions, rationalisation of taxes in its true sense, new development model and investment flexibility will spur the growth of emerging Indian corporates.

For the real estate sector, it would be extremely positive if the upcoming budget makes housing, infrastructure, and real estate as its focal point so that the multiplier effect on the economy will be extremely positive. There are aspects that have the potential to trigger growth in realty market in the near future, and for that, the budget and related policy changes will have to ensure that the advantages of economic policy changes and new regulatory regime are not diluted, as we move into the next fiscal year.

The author is the Chairman and MD of Hiranandani Communities and also the President of National Real Estate Development Council (NAREDCO)

Disclaimer: The views expressed in this article are solely those of the author and do not necessarily represent the views of the publication.

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