The Mumbai Metropolitan Region and the NCR are two of the worst-hit property markets in the country, with 95,000 and 195,000 stuck projects, respectively
The much-awaited package for the real estate sector, announced on Wednesday, is expected to revive most of the stalled projects in Mumbai and the National Capital Region (NCR), thanks to a tweak in the proposal, say analysts. The Rs 25,000-crore fund can be used to revive projects that have been declared non-performing assets and even those than have landed up in the National Company Law Tribunal (NCLT).
The Mumbai Metropolitan Region and the NCR are two of the worst-hit property markets in the country, with 95,000 and 195,000 stuck projects, respectively. About 55,000 units more are stuck in Tier-II cities.
“Almost 80 per cent projects in the NCR and the MMR will come to life,” said Samir Jasuja, founder at PropEquity.
The fund will help protect interests of homebuyers and viable projects will get liquidity, said J C Sharma, vice-chairman at Sobha, a Bengaluru-based developer, adding that sentiment of prospective buyers will also improve.
Ajay Bodke, chief executive officer and chief portfolio manager at Prabhudas Lilladher, said the fund has the potential to act as a force multiplier to impart necessary push to revive economic activity in the nerve centres of the economy.
The demand for including NPAs and NCLT cases has been met, but developers have several other demands lined up. They want reform to the goods and services tax (GST), enlargement to the definition of affordable housing and changes to income tax laws.
“There is inadequate demand not only in the real estate sector but in all related and unrelated ones. So the government needs to cut the GST rate for the next six months,” said Niranjan Hiranandani, chairman at Hiranandani Communities.
There is no GST on finished housing units. For under-construction affordable homes, it is 1 per cent; for those units not in the affordable category it is 5 per cent.
Rajeev Talwar, chief executive at DLF, the country’s largest listed developer, said input tax credit should be allowed when developers lease commercial properties. “There is a GST of 18 per cent in leasing of properties. Hence input tax credit should be allowed for consumption of raw materials here,” said Talwar.
Secondly, both developers and investors alike believe that the government should increase the limit of Rs 45 lakh for consideration of affordable housing to give a boost to housing sales.
“The government should increase the limit to Rs 75 lakh or Rs 1 crore for the consideration of affordable housing,” said Sharma of Sobha.
In the last Budget, the FM announced additional income tax deduction of Rs 1.5 lakh for home loans, where houses are priced up to Rs 45 lakh.
Also, under Section 80IB of the Income Tax Act, developers of affordable housing get complete exemption of income tax on profits. “If the limit is increased or done away with, it will open up large parts of the real estate market,” said Sharad Mittal, chief executive at Motilal Oswal Real Estate, a fund manager.
Thirdly, developers said there should be a slew of tax reforms to boost housing sales.
Talwar of DLF said according to current norms, after one sells a house, they are allowed to buy two homes without any capital gains tax.
“People should be allowed to buy as many houses without any restrictions,” he said.
Source- Business Standard.