New Delhi: Real estate has witnessed phenomenal growth rate in the last few years. While market dynamics have accelerated this pace, the government has taken numerous initiatives to provide the right triggers at the right time.
Rohtas Goel, CMD, Omaxe & Chairman, NREDC
However, there are still key areas where reforms are needed . The housing sector has for long been seeking the status of infrastructure.
Often enough real estate companies purchase agricultural land in order to step up infrastructure facilities. It is only by creating these facilities that raw land gets converted into developed land, fit for construction of houses and multistoried buildings for residential and commercial purposes, thus augmenting the housing stock of the nation.
Key Recommendations
• Restore Section 80 IB (10): This should be done for areas less than 1500sqft in order to generate interest of developers in LIG housing where demand far exceeds supply. As Income Tax deduction to developers under this section was available for projects approved before 31 March 2007 and the date was not extended in the Finance Bill 2007, the concession available under this section for projects sanctioned after 31March 2007 ceased
• Assign industry status: Real estate development to be given status at par with industry to enable banks to finance viable projects. At present, RBI discourages the banking system from making construction finance available to developers. By making finance available to developers with proven antecedents, projects will get completed faster and possession would be handed over to buyers/ users on time
• Advances/ loans to developers to be at par with institutions: Banks to provide construction advances / working capitals to developers on the lines of institutional loans to industry
• Reduce stamp duty: In order to reduce transaction cost of housing and discourage black money deals in housing, stamp duties to be reduced to 2-5%. This will generate more revenue to state governments by increasing transactions and helping reduce cost of securitization of housing loans
• Housing finance options for poor: Housing finance currently addresses needs of only middle class. Banking industry and Housing Finance Corporations (HFC) should work out a mechanism that can help address needs of poorer sections and rural households by subsidizsing interest rates, pooling funds and relaxing mortgage requirements as also through instruments like micro financing, community pool funding, agricultural land mortgaging and via annual installments for loan repayment
There should be graded scale of grant, subsidy and loan in such a way that the lowest strata of poor get maximum subsidy and the Economically Weaker Sections and Low Income Groups get a combination of subsidies and affordable loans