Affordable Housing Policy in Real Estate is Need of the Hour

The recent rail fare hike announced by the government has shaken up the struggling real estate industry, as this will result in an increase in cost of raw material.

The BJP manifesto talks of home for all by 2022. It is $6 trillion requirement to service the housing deficit of 18.8 million housing shortage in India. Beauty is that real estate sector can easily generate interest of domestic as well as foreign funding agencies in various forms.

Globally the housing growth is barometer of health of economy. But in India discouraging housing is the theme of banking regulator. The attitude of ministers and senior officials is such that they don’t even call the housing industry association for regular consultation on budget or discussing health of economy. Affordable housing policy in real estate is the need of the hour for the Indian real estate and the new government has a pivotal role in its hand to uplift the sector.

Presently, interest rates charged by the banks to developers and home buyers are at an all-time peak and need to be brought down below 7 per cent.

There is a dire need for an industry status for the realty sector. Once industry status is granted, funding for the real estate projects will become easier and at lower interest rate.

Another long pending issue in the sector is Single Window Clearance. Now the approval process is very lengthy and takes around 1.5 years to 2 years for approval. Approval processes (single window clearance) to be simplified as the cost of delay in approval, adds further to customers spending by 25% to 40%.

The Floor Space Index (FSI) or FAR rules were made decades ago. Changes need to be made in the Development Control Rules and higher FSI needs to be allotted to stabilise real estate rates.

The budget document should support a proper REIT structure. If the long overdue in having a REIT structure is made it can generate almost one lakh crore worth equity replacing debt.

We suggest a special focus on rental housing to serve the needs of a huge section of the population that may not be in a position to immediately buy houses. For the economic growth of the country and the real estate sector government should encourage setting up of SEZs across country. SEZs, once touted as tax/duty free enclaves have lost their sheen due to withdrawal of Minimum Alternative Tax (MAT) and Dividend Distribution Tax exemption.

Investors in SEZs with a long term development vision are exploring avenues for exit or de-notification. Restoring DDT and MAT benefits could help in salvaging SEZs.

Currently there are multiple taxes being levied on home buyers. We request the government to remove service tax as it further puts burden on the home buyer. We suggest for reducing FDI eligibility limit to 20,000 sq meter and capitalisation limit to $1 million. Broader base of FDI investment will enhance foreign investment and will be able to retain the funds with larger per cent of success.

In all, the need is the due attention and respect for business of Real Estate Development which will bring the desired growth in economy and job market.

Source: The New Indian Express