Budget Prospect: Challenges & Expectations

Feb. 27, 2013 - PRLog -- The developers and realty experts are keenly waiting for Union Budget 2013 to see what the government has for real estate sector. A lot of pages will be unfolded once it is released.

As a part of pre-budget expectations, Paharpur Business Centre and Software Technology Incubator Park (PBC-STIP) has few expectations to voice.

India is perceived as one of the eye-catching investment destinations globally on the spine of a multitude of factors like economic growth, rapid urbanization, demographic advantage, middle class population advanced technology and vast opportunities for business. However, real estate sector is grappling with numerous challenges, which are hoped to be met this year.

One of them is acquiring the status of ‘Industry’. Real Estate sector should be provided industry status so that the developers can work under a regulatory body and take the benefits of government policies.

Finance has always been a hard hit for real estate sector. Rising project expenditures and interest rates have a major impact on borrowing rates.

In this scenario:

§         Tax exemption on interest on housing loan should be raised nearly to Rs. 3 lakhs.

§         Stamp duty should be reduced.

§         MAT should be removed from SEZ’s to make them viable and tax free status restored as per original rules

§         Circle rates should be reviewed and updated every six months

§         Banks should provide construction advances / working capitals to developers on the lines of institutional loans to industry.

§         ECB should be opened up in real estate sector.

§         Government is also expected to consider larger allocation of funds and sanction of projects to the infrastructure segment. This will support the growth real estate.

§         A reduction in custom duty and taxes on new construction technology like pre-casting, aluminum framework, etc.

§         Extra 5% FAR should be recommended for Green Certified new buildings – Griha 4 star of LEED Gold and above

§         Reduction of tax, as an incentive can be given for BEE 5 star buildings

§         A tax benefit could be considered for retrofit LEED Platinum buildings

§         Impose a tax on municipal and ground water to make it more expensive so that the action promotes conservation and recycling

§         Recommend a House tax rebate for White roofs as the colour of Green is White! This will save energy needed for cooling of such buildings. This could be extended to white coloured cars.

The Budget 2013 should come up such viable amendments that would boost the realty sector and reduce energy consumption and thereby contribute to a better environment and mitigate the impending Climate Change disaster.

Green infrastructures cannot be sidelined as it is one of the vital subjects to be discussed about. Financial concerns also raise hesitations in opting for green buildings, as the construction of green buildings cost more on the upfront.

Some provisions and flexibilities for the construction of green buildings too are expected in the upcoming budget. This will motivate a large number of developers and buyers to opt for them.

To aid the national mission plan - build energy efficiency buildings:

§         Incentives should be provided for the use of the equipments in the energy-efficient buildings.

§         Provision of duty exemption on purchase of renewable power generating equipments, etc. as it will lower down the burden on the state electricity board.

§         Excise/custom duties should be reduced on the raw materials used for constructing green buildings.  

‘Affordability’ is another challenge for the real estate sector.

Approximately, 60 percent of buyers are from the middle class who often demands affordable homes and negotiations as well.

Some level of flexibility should be prioritized while making government policy and be considered for a special tax rebate.

The best change ever and a boon for real estate that can take place would be a slash in loans and policy rates.
This will increase the influx of liquidity in the market as well as lower interest rates, thus, fueling growth.

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