'Govt should give real estate 'infrastructure' status'

Budget 2021 | Govt should give real estate 'infrastructure' status

Credit: PTI Photo

By Ashish R Puravankara

The real estate sector is hopeful of the upcoming Union Budget scheduled in February, to improve upon momentum built during the last few months in 2020. Several regulatory measures, such as reducing Stamp duty (in certain states) and favourable REPO rates, have created a conducive environment for buyers to invest in real estate projects. We are hoping to see additional announcements that can ease the industry's burden. Currently, the cost of procuring raw materials like steel and cement for construction is very high. This hampers with the margins of builders and developers and could also cause a liquidity crunch for them. A reduction in the GST on building materials from the current 18% to 5% will be a game-changer. The move will bring relief to developers, and the benefits can be pass on to the end-user, which will further improve the buyers'; sentiments.

The real estate sector contributes to nearly 8% of the employment generated in the country. It has been a long-standing request by the industry to be granted infrastructure status, which will enable easy access to finances with lower interests for developers, thereby making projects even more affordable to the end-user. The streamlining of approvals enforced by RERA and the introduction of the Single Window Clearance will ensure approvals to be processed more quickly for projects and further result in decreased construction costs, thereby reducing the stress on the developers and homebuyers.

Additionally, the real estate is a highly capital intensive industry, and in the current situation, only well-capitalized developers can deal with the liquidity challenges. Construction finance given to the developers to construct residential projects should be treated like a Housing loan and shall have a favourable interest like a Housing Finance. Also, the banks should be permitted to fund for land purchases provided the plan sanction is obtained within 12 months from the date of purchase. RBI loan restructuring will allow developers to re-plan their inflow as per their outflow and approach their investors accordingly. The vision of Housing for all by 2022 will put an additional impetus of affordable homes. We are hopeful the government will bring relevant legislation to catalyze the segment further.

(The author is Managing Director, Puravankara Limited)