Real estate sector

The annual Union Budget is a very important event for the Indian economy during which the government amends or amplifies the direction for the Indian economy. Often, the Union Finance Ministry must make decisions which may not be popular with the broadest cross-section of Indians. At other times, the Union Budget is intended to be a crowd-pleaser, which can happen when general elections are on the horizon and appealing to the vote bank matters the most.

The Narendra Modi government has not pulled any punches in its bid to make Indian real estate a more transparent, wholesome and buyer-centric marketplace. Not only in the residential asset class (which affects Mr. Everyman directly) but also in the commercial office, retail, and industrial spaces, we have seen recent policies make a big difference. While demonetization and the disruptive RERA (Real Estate Regulatory Authority) served to clean up the residential sector, the hard policy focus on boosting affordable housing has brought even national-level players into this vital segment.

The expectation from Union Budget 2018-19 is that it will be a populist - however, PM Modi recently commented very aptly that Indians do not want sops and freebies as much as what they justly deserve. It will be interesting to see what kind of balancing act the Finance Ministry manages this time around. Meanwhile, the Indian real estate sector certainly hopes for some decisive policy pushes and amplifications which will boost it out of the ongoing slowdown:

• Industry status for the industry

This has been a fervent demand which has not been fulfilled so far. As one of the most vibrant GDP contributors, real estate - which is also the fourth-largest generator of employment in the country - definitely needs and deserves the all-important industry status as a whole, and not just in parts. With the sector attaining industry status, real estate developers will be able to access capital at subsidized interest rates and also via more channels. This would result in the overall costs of their projects reducing, thereby also helping to reduce the price of individual units, and therefore increasing demand for them. Also, this status would catalyze a more inclusive growth of the entire industry, which will help generate many more jobs across its many sub-sectors which are related to it, directly or indirectly.

• Single-window project clearance

This is another very dire requirement of the real estate industry which has so far not been responded to by the government. Given the government's firm intention of ensuring Housing for All by 2022, its failure to provide single-window clearance for all segments of housing is puzzling. The process of approval and clearance for residential property developments has been the Achilles heel of the industry for a long time. Without a doubt, the government has taken many initiatives to catalyze a more wholesome business environment in the sector, but a single window clearance mechanism has so far remained elusive. Single-window clearance would help significantly in bringing down the overall cycle time for residential developments, allowing builders to concentrate on ramping up project execution. After RERA's implementation, facilitation of a seamless clearances and approvals mechanism to reduce execution delays has become even more vital.  Check out Experts speak on what Finmin must do for health, IT, realty and other key sectors

• Tax rationalization for the REITs platform

So far, there has still not been any REIT listing in India. If the Union Budget makes a move to simplify REITs-related taxation norms, it can result in listings coming up much faster. The entire real estate sector would benefit from by the enhanced participation of the significantly increased cross-section of investors which REITs will bring about.

• Rationalized GST rates

Currently, under-construction properties attract 12 percent GST, which is, in fact, a lot more than it was before GST was implemented. The Union Budget is an opportunity for the government to render GST tax-neutral and thereby revive demand for real estate. Likewise, more clarity on how input tax credit is applied would play a big role in rationalizing the taxes. Read also: GST rate cuts: What is cheaper, what is dearer

• Amplified income tax benefits for first-time homebuyers

This obviously matters a lot for the residential real estate sector, as higher savings on property purchase invariably results in higher demand for self-owned properties. As of now under section 80EE of the Income Tax Act, first-time homebuyers are able to claim an additional Rs. 50,000 in tax deduction during a financial year as long as some conditions are fulfilled. Increasing the tax exemption for the home acquisition will be a big incentive for first-time homebuyers to finally take the plunge.

• Amplified incentives for sustainable real estate development

Green buildings are, without a doubt, a very vital need in India, considering the rapidly deteriorating urban environment. Unfortunately, even though they attract only marginally higher construction costs, these costs - which have to be passed on to buyers - have prevented most of the Indian developers from foraying into green buildings. The ongoing and inevitable future challenges to the environment that India faces should be reason enough for the government to incentivize more developers, such as allowing more FSI and/or more tax exemptions for green building development.

(The author is the chairman of ANAROCK Property Consultants and the views expressed are his own.)