Budget 2019: Wishlist from CREDAI Karnataka

By  Austin Roach

The real estate industry which witnessed many marquee changes like RERA, GST, Demonetization, REITs, et. al in the last tenure of the Modi government is expecting more sops in the second term. The Union Budget is the gospel as far as Indian economy is concerned.  Realty sector is the second largest contributor to Indian GDP. The slew of reforms in the last couple of years has reinstated the confidence of buyers in the sector and the sector is attracting foreign investors in the country, thereby contributing to the wholesome growth of the sector.  

The interim budget presented a few months back provided definitive relief for affordable housing developers and has given a boost to the real estate industry by relaxing the tax norms. This has improved buyers’ sentiments by bringing in more transparency and accountability. 

The Union Budget which will be presented by the new Union Finance minister Nirmala Sitharaman is already drawing a lot of attention from India Inc as they are expecting the budget to be a game changer as far as the economy is concerned and the job creation, which was missed by the Modi government in the first term. Industry leaders are optimistic that the second innings of the Modi government will bring new reforms and address the concerns and issues of the realty industry. 

As the apex body of developers and real estate fraternity – CREDAI expects the government to look into the following demands of the relators to boost the sector. 
1.    Tax exemption for unsold inventory
Interim budget 2019 had proposed that unsold stock unit in the market will get tax relief for two years from the end of the year in which completion certificate is obtained. As this tax will put a burden on the real estate developers due to the current market condition, developers recommend the government for the specific exclusion of unsold inventory from income tax liability.
2.    Reduction in GST rates on construction materials
Construction cost is directly dependent on the cost of the raw materials and the procurement charges. Although the government has reduced the GST for the affordable and under construction buildings, the materials like cement (28%), steel, doors, windows, electrical, sanitary items (18%) still pose a challenge due to the high GST rates. Industry requests the government to reduce the inputs and input services tax to 5% - 12%.
3.    Industry status to the real estate sector
It is the long overdue demand from the real estate sector to provide them with the industrial status as the sector is the second largest contributor to the GDP and rural employment.
4.    Single window clearance
The real estate sector has been requesting the government for the single window clearance for the speedy project approvals and simplified processes. Currently, these processes are taking enormous time which is impacting the project delivery.
5.    Affordable housing
The profits from the business of developing affordable housing are exempt if the project is approved before 31 March 2019. The interim budget proposed to extend this till March 2020. Real estate sector recommends extending the timeline further to support the government’s vision “Housing for all by 2022”. Also, Maximum Alternative Tax (MAT) is a huge burden for the developers developing affordable housing. The removal or reduction in this will boost the affordable housing development. 
6.    RERA to consider multiple tower project as an ongoing project till the completion
In an integrated township project, until the construction of all the towers gets completed, RERA should consider it as the ongoing project. This will help the project in maintaining the GST rate of under construction projects. 
7.    Availability of quality funding for the construction
Funding has always been a critical issue faced by the realty sector in India. Due to the lack of appropriate funding from banks, real estate developers are now approaching the NBFCs, which also has crumbled recently. This has impacted the borrowing cost and easy access to credit availability. Lack of funds or easy availability of credit led to slow down of the majority of projects, leaving the developer in the lurch. The government should make some fundamental changes in the country which will further increase foreign investments and solve the liquidity problem in the sector.
8.    Direct tax holiday for rental profits for IT/ITeS development
There is a high demand for the development and leasing of IT/ITeS space. However, implementation of demonetization, RERA, GST resulted in the slowdown of the sector in the last few years which resulted in the liquidity crunch. Even though there is a demand for larger developments, lack of liquidity has created a delay in completion. Therefore, if the government introduces 10 year tax holiday for rental profits for the development and leasing of IT/ITeS spaces, it would boost the economy and would meet the demands of IT/ITeS leasing. 
9.    “Housing for All” – Support for the developers
To fulfill the government’s vision of Housing for all by 2022, it is important for the developers to implement technology in the construction. Such technology projects should be given priority while approvals and to be considered for tax and GST rebates. 
10.    Income tax - Deduction for principal repayment of housing loan up to INR 5 lakhs per annum may be considered for exclusive exemption in addition to current INR 1.50 lakhs per annum under section 80 C of the IT act.

Austin Roach is the president of CREDAI Karnataka 

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