New Budget,old demands

On the policy front,a key expectation of the industry includes relaxation of end-use restrictions on the use of the proceeds from external commercial borrowings besides efforts towards promotion and development of a viable Real Estate Investment Trust/Real Estate Mutual Fund REIT/REMF market to provide the industry with much needed liquidity. Besides,the government needs to make a concerted effort in fast-tracking the implementation of some of its flagship schemes including the Rajiv Awas Yojana RAY scheme for slum redevelopment which is yet to take off.

SIMPLIFY TAXES

One of the most significant expectations of the real estate sector is the simplification and rationalisation of the overall indirect tax structure which is currently plagued by multiplicity and classification issues. Specifically,one of the long standing demands of the industry has been a significant reduction in stamp duties on real estate transactions. The proposed Goods and Services Tax GST regime is going to be a game changer and it is important that the concerns of the real estate industry,

particularly on the interplay of GST and local levies are

adequately addressed,

says Maroo.

Chairman of industry body

Assocham8217;s real estate council Navin M Raheja says that the group has since the past two years been in talks with the government on certain points/issues which we would like to get addressed in budget. Raheja,who is also CMD of Delhi-based Raheja Developers,itemises the industrys expectations on tax issues saying that it wants extension of tax holidays on EWS and LIG housing under Section 80-IB; upward revision in interest on home loan deduction limit; reintroduction of standard deduction; and rationalisation of stamp duty.

R K Jain,executive director of Wave City,an integrated township project in Ghaziabad by Wave Inc the erstwhile Chadha Group,a R. 2,500 crore diversified group,says Income tax deduction under Section 80-IB was available to developers for affordable housing. This facility was discontinued from April 2008. This concession was highly successful in triggering affordable housing but since state laws were not permitting higher densities,the benefit of it could not be realised to fullest possible extent. Now almost all states have relaxed their density norms. Revival of concessions under Section 80-IB would give a boost to affordable housing.

INFRASTRUCTURE BOOST

With a rapidly growing urban population,the industry feels the government needs to allocate funds for development of satellite towns. Says Harmit Chawla,vice-president sales and marketing at Delhi-based Paras Buildtech,Many projects are coming up in suburbs where infrastructure is wanting. For total development,funds should be earmarked to be used to connect satellite areas with main cities. As most dwellings are coming up in the suburbs,the need for better

infrastructure has increased. If we want people to live in these places,we have to give them reason

enough to move from the main city to these areas.

On another note,Sunil Dahiya,managing director of Vigneshwara Developers,points to existing anomalies that he wants addressed in the coming budget. He feels tax sops should be extended to more projects by extending the parameters that determine infrastructure projects. A real estate project is not considered infrastructure,but when it is part of a highway or toll road project on BOT/BOO,the promoter enjoys income tax exemption. Therefore a one-line statement in the budget should be to remove this anomaly and consider all real estate projects more than 10 acres as infrastructure project and provide the relevant applicable tax exemption to it. This will help developers leverage this cost benefit to the consumer and we could see some price benefit coming to the consumer, says Dahiya.

Echoing Dahiyas viewpoint is Naveen Raheja,who in a letter to the ministries of finance and urban development says infrastructure,as earlier defined by the government,allowed for funding of townships and residential / commercial buildings. However,he says in the letter,this seems to have got de-linked and branded as real estate during the time when land and property prices were spiralling. A change in the definition of real estate sector resulted in these activities being categorised as outside of infrastructure sector. The immediate implication was that banks could not extend loans to real estate activities on the same norms as they can to infrastructure companies. In the sluggish environment of real estate market,it may be desirable to reinstate the definition.

EASIER FUNDING

In its suggestions to the finance ministry for the budget,the Royal Institution of Chartered Surveyors RICS has proposed rationalisation of existing funding,incentives and taxation,in favour of establishing better mechanisms to meet funding and delivery needs of infrastructure and housing in the country. The budgets investments in the infrastructure sector should be set as a priority,as good infrastructure is very important for the economic growth of the country,RICS proposes.

There is also a growing demand to do away with the three-year lock-in period for foreign direct investments FDI in the sector. Also,the size and investment requirements may be reconsidered to broad stream FDI participation in real estate development. External commercial borrowing ECB should be permitted for funding construction costs of real-estate projects which qualify for 100 per cent FDI. As of now,ECBs are not allowed for real estate due to end-use restrictions and alternative sources for construction finance from banks are expensive, says Pradeep Jain,chairman of BSE-listed Parsvnath Developers.

Sarang Wadhwan,managing director of Housing Development amp; Infrastructure Ltd,has his own wish list to ease funding: Relaxation of FDI lock in to one year and allow ECB for more than 5 acre townships; creation of an Urban Infrastructure Fund for affordable housing,slum rehabilitation and redevelopment projects; and classifying the real estate sector as a priority lending sector.

A long-time expectation of the sector is to be accorded industry status. In his letter to the government,Raheja writes The industry should fairly be accorded the long pending status of Industrial Undertaking for the purpose of availing long-term and short-term finances as available to other industries.

GREEN HOPES

As the environment becomes more fragile with every new development,the logical way forward is to think green. The government does not have any specific tax benefits or policies for accounting towards the higher costs incurred in green buildings at present,like higher levels of depreciation and tax breaks. 8220;Understanding the fact that going green is the need of the hour,we expect the government to extend subsidies and tax benefits for eco-friendly projects. Such steps would not only encourage more and more developers to build green projects but also help in lowering the carbon emissions,8221; says Brijesh Bhanote,senior vice-president of The 3C Company,a leading green developer in NCR.

Bhim Yadav,chief executive officer of Falcon Realty,a smaller player in green developments,says,8221;The government does not have specific tax benefits or policies for accounting towards the higher costs incurred in green buildings. The government could benchmark apex bodies similar as the Singapore Green Building Council and

provide a structured approach through higher levels of depreciation and tax breaks for certified green buildings.