Friday 27 June 2014

Real estate hopes for transforming Budget

Anticipating encouraging announcements in the forthcoming budget, the Indian real estate industry hopes that the new government will be able to re-establish the country as an economic force and boost consumer and investor confidence.

With the new government now firmly in charge of steering the country, the Indian economy is perched on the threshold of recovery and growth. The serious issues that have plagued the sector for so long may now be proactively addressed.  

Anticipating encouraging announcements in the forthcoming budget, the Indian real estate industry hopes that the new government will be able to re-establish the country as an economic force and boost consumer and investor confidence. 


We look forward to the announcement of progressive policies pertaining to FDI in real estate, since the sector is in marked need of a more liberalized funding flow. Global investors are once again enthusiastically eyeing the Indian market for the immense opportunities it offers. There is now a very real possibility of a huge increase in foreign investment inflows, and the budget is definitely the ideal opportunity for taking serious steps to encourage this. 

The real estate industry once again reiterates its sincere call for preferential industry status. Despite many petitions to the government to this effect, real estate was not been granted this status even though its role as a significant growth driver for the economy is beyond dispute. At the very least, housing must be given infrastructure status, since housing is the very basis and framework of the nation and its economy. The national housing deficit can and must be reduced, especially with regards to affordable housing. 

The new government has announced a very clear mandate in terms of housing for all, and will therefore need to come up with a detailed affordable housing policy. Such a policy will have to focus on increasing the supply of genuinely affordable homes in the budget bracket of Rs. 20-25 lakh. 

The success of such a policy will depend on respective state governments playing a proactive role, as well. Ideally, affordable housing projects should be allowed on smaller land parcels so that such land under private holding can be monetised effectively. Alternately, the government can release land currently being held by it to developers for affordable housing projects, at nominal rates. 

 Also required is a single-window clearance for such affordable housing projects, as well as additional incentives in the form of waiver of registration costs, stamp duties, etc. on land purchase for developers undertaking such projects. Other additional pay-outs for residential projects to the government, such as conversion and internal development charges, could also be waived. The policy could fix the maximum price for such projects, thus enabling them to remain truly affordable. Also, for such affordable housing projects, density and FAR norms can be increased to enable mass housing at lower costs.

Developers of affordable housing can also be incentivised in various ways, such as:  

> Allowing them a certain commercial component within these projects which they can sell at market rates 
> Reducing duties and excise on pre-fabricated materials for use in affordable housing projects
> Providing additional FAR to projects that also comply with environmental sustainability guidelines. 

All such benefits to developers will ensure a pass-through to the buyers, for whom the prices will become affordable. A clearly-defined policy by the governments along such lines would enable long-term investments into this sector. '

The Indian real estate sector also looks forward to a budget that outlines measures to tackle inflation without stifling overall growth. Interest rates must rationalize and home sales pick up once more. The stock markets have already perked up visibly up and the Indian rupee is regaining strength. We certainly expect that the new government will take measures to reduce inflation, but also ensure that this is not done at the cost of the green shoots of market positivity we are now seeing.

Source: JLL India

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