by Akhilesh k Prasad
The real estate sector contributes 6-7% of the GDP and employs over 50 million people currently. While it stands as the second largest employer as of now, it is expected to generate 50-60% jobs in the next 5 years. In this respect, the real estate industry is significant for the overall growth of the Indian economy.
In the last couple of years, the government has implemented some important policy decisions such as Goods and Services Tax (GST), Real Estate Regulation (and Development) Act 2016, Benami Properties Act and demonetization. These decisions were initially received with knee jerk reactions. But now that the dust is beginning to settle, we are looking forward to a more transparent, corporatized industry in keeping with global best practices that boost investor and buyer confidence.
The government has laid special emphasis in the affordable housing segment in keeping with its “housing for all by 2022” initiative. The move has provided a considerable fillip to the otherwise lacklustre residential real estate sector. The focus of the interim Budget 2019 has also been on affordable housing. The budget largely ignored the demands of the retail and commercial real estate.
The industry has put forward several demands in front of the government that are yet to be acted upon. Primary among them is the resolution of the NBFC deadlock. As the real estate sector does not have industry status, banks do not priorities financing realty. Thus, developers are compelled to borrow from NBFCs at higher costs. This either pressurizes their margins, or the burden is shifted on the buyers. Moreover, a lot of projects have been stalled due to lack of funds lately, especially in the NCR. The industry demands that the National Buildings Construction Corporation (NBCC) should be roped in completing such projects.
At present, only the affordable housing segment has been granted industry status. Such a status should be given to the entire real estate sector to facilitate easier finance and other benefits.
Co-working spaces are the new trend in commercial real estate. The rise of this trend is largely due to the increasing number of start-ups. Such start-ups have long demanded the removal of Angel tax, which is levied on sums invested in companies by independent investors otherwise called ‘angels.’ Such an investment is considered an income and taxed at 30%. As late as 19th February, the government has redefined ‘start-ups’ to provide partial relief from the tax.
Rationalisation of GST could also go a long way in boosting the real estate sector. For instance, Demands like the GST on cement should be down from 28% to 18% and on under construction housing projects from 12% to 5%, could reduce capital stress for developers, reduce costs and thereby increase demand.
While there are several other issues related to realty that may require government intervention, the aforesaid are some that should be attended for quicker results.