'Hope to see attractive proposition for money lending'

'Hope to see attractive proposition for money lending'

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By Nimish Gupta

The liquidity crisis impacting the sector is one of its biggest challenges. The Government has already taken some bold steps to unlock some capital in the sector, but further steps are definitely needed in the form of fiscal measures. We need to create a sustainable financing system on the back of robust regulation and an implementing infrastructure. There are options available to reinvigorate finance in the sector and these are recommendations being extended by RICS for the upcoming budget. This also links back to the effective implementation of the AIF. Additionally, there has to be a renewed focus accorded to rental housing, which we believe will be a major driver of the residential market. Lastly, infrastructure development needs to be effectively managed in order to fully contribute to the nation building process. While funds are being deployed, project implementation and execution need to be timely.”

Ahead of the Union Budget 2020-21, RICS expects the Government’s continued focus on infrastructure development and nation building. Given the fact that the economy has settled-down post multiple measures and layers of reforms; there are several expectations from the Union Budget to fuel consumption, increase demand in the market and aid the economy on its way to achieve higher growth rates, yet again. 

While the budget is expected to push areas of economic growth, a few macro-economic reforms are on the anvil. These are expected with respect to the rationalisation of direct and indirect tax rates; consolidation of GST rate slabs; and large institutional reforms, specifically within the education sector. 

Given the impetus and stimulus that the Government in recent times has extended to the realty sector, it is heartening to note that despite a formal industry status (which has long been demanded) not being accorded, the sector is still being treated as an industry. This is indicative of the Government seeing the sector as an engine of economic growth and employment generation.




To redress the core crisis of liquidity in the sector, the Government will need to take a stable policy direction for taxation and reforms in land and labour.

We hope to see an attractive proposition for money lending and cheaper Financial Institution (FI) borrowing.

Lower/clubbing of GST rates are expected in certain cases, where basic raw materials like steel, cement etc. are unburdened. 

Include ITC benefit in GST for under-construction homes to reduce the burden on end buyer, giving an impetus to under construction projects in residential.

Reduction in import duty on steel, coal, sand etc.

The Government should look at the possibility of creating a securitization market to free up capital and measures to boost participation in the global Bond’s Market.



The Real Estate Regulatory and Development Authority (RERA) which is moving towards the creation of common open platform (COP) needs to be strengthened.

RICS is helping put together a process manual on how this digital platform will work, taking into account the principles of earned value management (EVM).

This will help track and monitor project development as per schedule. 

National Infrastructure Pipeline (NIP) is expected to create a ripple effect for boosting demand in real estate sector. This however requires the Government to create transparency around land ownership and pooling.

Rental Housing to receive a boost.

The draft Model Tenancy Act, 2019 that has been devised to boost supply in the rental housing segment makes renting more lucrative for both landlords and tenants.

It bridges the gaps that currently exists in policies regulating the rental housing segment.

It is advisable that poor/homeless/migrants should be provided with dwellings that have a rental rate of INR 2,000 to INR 2,500 per month.

Student population which is still not independent should have a rental outlay of INR 5,000to INR 6,000 per month .

White-collar employees (LIG/MIG)should have a rental outlay of INR 20,000toINR 25,000 per month.

The above should lay the ground, for creating a critical mass for Residential REITS.

Extend the INR 2 lac tax rebate on housing loan interest rates under Section 24 of the Income Tax Act, in order to boost housing demand.

Further impetus is required to attract private sector investors in affordable housing. Although the segment has been given infrastructure status, it is proving difficult for developers to get capital from Banks and NBFCs at lower interest rates, making these projects not so lucrative.

The recently introduced lower 15% tax rate for companies looking to set up new factories, will only be effective if land acquisition is made easy, through land reforms. This will also help foreign investors to enter the sector, making the approval process of real estate projects smoother.



The Government’s move to aid the market by setting up Alternative Fund Investment of INR 25K crore to revive the realty sector must be implemented at the earliest. It is critical to provide relief to developers and improve buyer sentiment, considering the current situation..

The ongoing liquidity crisis enveloping all sectors can be handled by easing liquidity in the market especially for developers, through increase in capital flow and stable supply of fully constructed homes. This will also deter unreasonable pricing in the sector.

As alternative instruments of finance to revive the sector, the Government should consider Housing Provident Funds; along with Contractual Savings Scheme for Housing and Mortgage Securities in emerging markets.

Contractual Savings Schemes for Housing (CHS) are extremely popular with policymakers in developed realty markets. Post demonetization, and ‘JAN DHAN YOJANA’ – there is a significant surge, not only in the formal economy, but there also being a greater availability of affordable housing in semi-urban and rural areas, which are in closer vicinity to mid-to-large cities. These are the right factors for CSS being successful in India as well.

Post cleaning of Non-Performing Assets (NPA), increased regulatory compliance, macroeconomic environment - India seems to have all the right factors to develop a Mortgage Securities Market with more complex instruments, in order to increase its share in housing finance.

Government should consider enhanced credit off-take from banks, in light of the NBFC crisis. Due to stimulus packages by the government and strict measures by RBI, banks are already looking at improved gross NPAs (nearly 9.1% towards September-end 2019). 

Creation of Housing Provident Funds (HPFs). These work on accrued savings, therefore not only do they provide a push to the general economy, but aide in creating a long-term sustainable financing model. This is a long-term housing funding pool and suggested as being created as Government regulated (through existing Provident Fund (PF) department) specialized financial institutions, that run on mandatory savings from employees, as a defined percentage of their salary (similar to our current PF system).

Interest rate cut on home loans is expected, where the benefit of the reduced rates need to be passed on to end-consumers.



The budget should focus on quicker on-ground implementation of infrastructure development. The Government’s commitment to Infrastructure is undeniable. However, the proposal to expend INR 100 lakh crores on it over the next five years, needs to be implemented quickly, to derive optimal results for aiding the sector.

Further impetus and funds are expected to be deployed and utilised towards the Smart City’s Mission.

Further Metro Rail projects in Tier II and Tier III cities are expected to be approved and sanctioned.

To create safe investment options in Infrastructure, PPP projects under Hybrid Annuity Model should be encouraged.

Greater emphasis should be accorded to ‘Sagarmala’ (River-Linking) projects by nationwide water levelling of flood waters, which results in huge damages to human life and other resources.

Warehousing and Industrial Warehousing to be promoted extensively(in keeping with the focus on Bharatmala, Sagarmala and Fright Corridors) to help ease the wide fluctuations in seasonal food prices. 



Expect large scale reforms in the education sector and creation of effective regulatory bodies to regulate the current education system.

Expect the creation of further institutes such as the Indian Institutes of Technology (IITs); All India Institute of Medical Sciences (AIIMS); and Indian Institute of Management (IIMs).

Focus must be extended on measures that help employment generation and higher consumption.

Skill development, specifically with respect to the Built Environment sector (Real Estate, Construction and Infrastructure) needs to directly link to employment generation.

In addition to ‘National Skill Development Mission’ and ‘Pradhan Mantri Kaushal Vikas Yojana’, a holistic framework needs to be created which include education reforms and focus on ‘farm to future’ programs. This is more relevant given the seasonality of labour in Indian Built Environment sector, who traditionally work on daily wages when their farming activity has been completed.

The Ministry of Skill Development and Entrepreneurship (MSDE) has established such programs. RICS is also assisting the Ministry in creating a framework linked to the Built Environment sector, where vocational skills will be enhanced and linked to the development and recognition of professional skills, resulting in improving efficiencies and better / greater job creation at all levels.



Continued focus is expected on power generation through renewable resources.

The government might consider re-opening coal mining in Odisha and adjoining states to reduce its reliance on Petro products.

Personal tax benefits extended under Section 80C should be reduced or readjusted, last hike under the deduction limit under was done in 2014. 


(The writer is the MD of RICS South Asia.)



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