Wish Lists for Budget 2015

Anuj Puri, Chairman & Country Head, JLL India

Provide on-ground impetus for affordable housing In the previous nine-month Budget, the new government outlined its vision for boosting affordable housing. From the upcoming 12-month budget, the Indian real estate sector looks forward to provisions that firm this vision up on the ground.

Provide tax incentives to boost rental housing The Union Budget needs to provide tax incentives for renting out of residential properties. Currently, rental income is treated as normal taxable income. Providing tax breaks specific to rental income will give a significant boost to rental housing segment in the country, and help increase rental supply in the metros.

Enable faster project approvals Developers have been campaigning for a faster project approval process for good reasons. Faster approvals would beef up the supply pipeline, help bring prices down and also ensure that real estate remain viable as a business. The Budget should provide suitable relief on this front, while simultaneously ensuring that construction quality norms are not compromised in the process and that faster approvals do not result in support infrastructure failure in new precincts being developed.

Implement RERA The approval of the pending Real Estate Regulatory Bill was deferred once again only recently. It must now be implemented so that the Indian real estate market becomes attractive for foreign investors. The upcoming Union Budget should make this vitally required policy a reality and put an end to the suspense.

Relax Counter-Productive Clauses In LARR Act The Land Acquisition, Rehabilitation and Resettlement Act, formulated and re-formulated several times, has so far failed to counter land-related bureaucracy in India and has to date done quite the opposite. The Union Budget should present a workable and streamlined LARR Act, with significant relaxation in the currently tedious rehabilitation clauses and other norms.

Provide more incentives for sustainable realty The Budget should announce state-level subsidies for development of green spaces so that developers can keep their cost at par with non-green spaces.

Fast-Track REITs Until vital changes to overcome the tax hurdles, REITs - which can literally be a life-saver for Indian real estate - cannot take off. In the interest of the real estate sector as well as the overall economy, the Budget must address this issue.

Encourage FII Participation In Infrastructure India is still an infrastructure deficient country and needs large investments to help bridge the infra gap. The Union Budget should make more provisions to increase foreign investors' participation in this sector.

Sanjay Dutt, Executive Managing Director, South Asia - Cushman & Wakefield

There is a strong need for the government to reconsider the decision to impose levies such as Minimum Alternative Tax (MAT) and Dividend Distribution Tax (DDT) in SEZs.

Introduce uniform tax regime Direct Tax Code (DTC) and Goods and Services Tax (GST) and rationalize stamp duty across states so that there is a higher degree of standardization.

Income Tax deduction under Section 80-IB is currently allowed to developers to build affordable housing projects sanctioned on or before March 31, 2008. As this date has not been extended, it needs to be re-introduced in the Parliament in order to generate interest of developers in Low Income Group (LIG) housing where demand exceeds supply substantially.

Re-introduce the interest subvention for affordable housing, which was 1\% on housing loans of up to Rs. 25 lakhs for houses that were valued at up to Rs. 40 lakhs. This will continue to have a positive impact on residential sales in small cities and towns and peripheral locations of major metros where such units are available.

Introduce and encourage building rental housing and affordable housing projects; make efforts to enhance supply side factors especially in cities such as Mumbai and the Delhi National Capital Region (NCR). The necessary funding could be either provided through budgetary allocations or with the Credit Guarantee Trust Fund, setup by the Government last year, guaranteeing the loans taken for such projects.

Enact provisions for Special Residential Zones (SRZs) to incentivize the growth of housing stock, especially in peripheral city limits and other targeted locations. l Introduce special incentives for the development of new smart cities.

Provide tax incentives to boost retail investments in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trust (InvITs); specifically, exemption from DDT and capital gains on transfer of assets to REITs.

Provide clarity on whether FDI is allowed in owning other built commercial asset classes such as shopping centres / malls. The central government also needs to pass the proposed Real Estate Regulation Bill and implement it in on a priority basis to bring in more transparency and best practices.

Dhruv Agarwala, CEO and Co-founder, PropTiger.com

Though part of clarity on taxation policy was announced in the last budget, it was not sufficient for accelerating formation of REITs in India. There are some still taxation issues, which are holding back foreign as well as domestic investors in launching REITs.

Second, while the government has made several announcements with regard to creation of smart cities and even announced allocation for the same in the last budget, the Union Budget 2015-16 should now go a step ahead and outline a framework for identifying and developing smart cities. This will help not only developers and sellers but also inform buyers' decision making.

Third, need for uniform taxation on purchase of flat. Currently, every buyer has to pay Service Tax and VAT for purchase of property. Though rules for service tax are uniform across country, VAT differs a lot. We expect government to announce reduction in as well as standardization of these taxes across country. Similarly, stamp duty varies a lot within a state and sometimes within a city. A uniform stamp duty regime will help buyers in planning their finances better.

Fourth, while affordable housing did receive a fillip from the government in the last budget, it was only limited to targeting supply of affordable housing such as FDI relaxation, home loan availability, etc. We recommend government to bring back 1\% interest subsidy for houses costing above Rs 50 Lakh in the Tier 1 cities.

Fifth, rental housing. To encourage investment in rental housing, government should modify taxation rules of rental income. Currently, rental income from residential unit is treated as normal income, which discourages investment in this housing segment."

Rajesh Prajapati, Managing Director, Prajapati Constructions Ltd.

Our wish list would be giving industry status to the real estate industry, bringing down interest rates on housing loans, removing or at least reducing service tax substantially, income tax exemption for affordable homes built for EWS and LIG and borrowing for construction companies to be available at lower interest rates.

Giving industry status to the real estate industry will attract huge foreign direct investments into the sector giving developers a major reprieve due to want of funding options available in the country. This will result in faster completion of projects thereby reducing cost of project resulting in property prices offered at reduced cost to home buyers.

Bringing down interest rates on housing loans will encourage buyers to purchase their dream homes as it will make buying property more affordable.

Reducing service tax will take a huge burden off the shoulders of home buyers as they are already burdened with numerous taxes and the service tax is an additional burden on them.

The key areas to prioritize focus are providing finance to housing industry at lower cost and creating an atmosphere where approval mechanism is faster. Also, focus on easing norms for buying land as it is the basic raw material.

Lalit Kumar Jain, Chairman, CREDAI

A. Administrative Reform: Single Window (including central, state government clearances through standardization of check list) and online clearances removing human interference to expedite approvals and eliminate corruption. Make the entire system accountable by fixing responsibilities. Amend municipal administration and political control system within law. Municipal administrative cadre for better human resource.

B. Banking reform: Currently the housing sector is marred by misconceptions and with rigid RBI regimes it has delayed projects further adding to rising costs while consumers continue to suffer from increasing prices. Housing to be given a status of Infrastructure and funding to be made easier with easy role over. Home loan rates to be bought below 7.5\%, lending rates below 10\%. Funding to developers to include land cost as well as role over facilities like industry. (the market is cyclical and hence the banks should adjust as per market conditions)

C. Tax Reforms: Currently housing pays about 36-37\% of sale prices in taxation to centre, state and local municipal bodies in direct and indirect taxes. Fiscal reforms with FDI, ECB, REIT and mutual funds need to be focused and rationalized. Deduction of interest up to 5 lakh rupees u/s 24 of income tax act on home loans. Capital gains tax ceiling of one house to be removed to promote rental housing. 80 IB revivals for affordable housing up to 65 sq meter carpet. State to be advised for concessional stamp duty, premium and development charges, property taxes on EWS, LIG and affordable housing. Priority sector home loan lending ceiling to be 50 lakh. Rental income on affordable housing tenement to be tax exempted. Tax rebates for investment in skill training. Deduction under 35 ad including cost of land and building for Slum rehabilitation projects approved under slum rehabilitation rules

D. Land Reforms: FAR/ FSI to be more than 5 in developed urban areas. For affordable infrastructure lower land component costs, viable public transportation and save greenland destruction. A complete relook of FAR system in country on the lines of Hyderabad. If needed land titles to be managed through online registration process which would enhance faster investment in the sector. It would also be important to relook land inquisitions and Real Estate Regulation bill to achieve the underlined objective of CREDAI. Land title and title insurance. Digitization of land records and system of mutations to be revamped. One language and national land record bank for ease of land transactions.

"FIVE KEY TAKEAWAYS FOR THE BUDGET”:

1. Tax exemption on home loans is a key factor Most house buyers take a home loan to finance the purchase. The tax exemption on the principal and interest amount repayment has been one of the key factors that makes it feasible for people to become owners at an earlier age. However, the tax exemption amount needs to be ramped up quickly.

2. Land and related issues are a major hindrance The fact of the matter is that land happens to be a primary component without which constructing homes is impossible. The high cost of this raw material has led to higher property prices. Moreover, there is a need for greater transparency in records and their digitization to avoid frauds.

3. Affordable housing is a relative concept there is a vast gap in pricing levels of rural areas and urban areas. Even within urban areas, there are layers of prime, suburban and peripheral areas where prices can be in a wide range but 'affordable' is still beyond the reach of entry-level buyers, so incentives need to be realistic.

4. Project clearances are the stumbling block No matter how fast a project can be developed with the latest technology, there is always some little clearance holding it back. One-window clearance needs to be converted to reality for cities like Mumbai where the cost of delays can add a substantial amount to the already existing high land costs.

5. Money matters at every step of the way The logic is simple. Lower taxes encourage people to buy more. The government can actually earn greater revenues by simply reducing the plethora of taxes that home buyers need to negotiate through and fixing reasonable rates for them as well. "

Credit: Team DNA