Real estate sector seeks lower finance costs, faster clearances

 

Also on the real estate developers' wishlist is a sustained structure of governance for the sector and introduction of methods to reduce the time taken to obtain the permissions and clearances for a project. A delay in the completion of a project, mainly due to delayed clearances, always leads to cost escalation and higher prices for consumers, they argue.

PUNE: The country's real estate players are hoping that the finance minister's budget provisions, to be announced on February 28, will bring down the costs of finance for the construction sector, which they insist will play a major role in offering lower rates for their product, according to media report.

 Lalit Kumar Jain, national president of the Confederation of Real Estate Developers' Associations of India (Credai), told  Times News Network that the finance minister should allow tax exemption for inputs used in construction of small houses, of under 60 sq m carpet area. Special housing zones on the lines of Special Economic Zones could also be created, with tax exemptions for constructing 45 sq m houses for low income groups and 30 sq m houses for the economically weaker sections, Jain said.

He said, "Widespread tax incentives can be leveraged to make the real estate sector the new growth engine of the economy...It is high time that the government took a pragmatic and practical look at the real estate sector and took steps that help the industry in particular and the economy in general." Interest rates for housing loans should be cut to 7.5%, he added.

Credai suggested that a Real Estate Investment Trust be formed and called for special rental housing projects under the affordable segment, treating the expenditure as capital investment for long-term capital gains, exemption from income tax, service tax, value added tax and stamp duty for rental housing. Even the rental income from these projects must be exempt from income tax as there are substantial indirect benefits, the apex body has said.

Anuj Puri, chairman and country head for real estate advisory company Jones Lang LaSalle India, told Times of India that considering that the budget is expected to be a populist one ahead of the 2014 polls, addressing the compromised GDP and skyrocketing inflation must be given the highest priority.

The government should come up with simple and effective polices that will ease real estate development approval procedures. Obtaining the 57-odd permissions to begin construction of a project can take up to two years. During this time, the cost of acquisition or even just holding the land for projects goes up. Lack of single-window clearance mechanisms causes project delays, which prove to be expensive to both developers and end users, Puri added.