Vaithianathan Ramachandran, Managing Director, Tata Capital Housing Finance Limited lists out his expectations for the housing sector from the upcoming Budget
As per the new Global Construction report, the volume of infrastructure development through construction output is expected to grow to USD 15.5 trillion worldwide by 2030 – with India forecasted to overtake Japan as the world’s third largest construction market by 2021. The housing sector alone contributes around 5-6 percent to our country's Gross Domestic Product (GDP).
Keeping these points in mind, our government has made infrastructure development its top priority, which should help boost economic growth.
However, it is a well-established fact that currently, the residential real estate market is witnessing a challenging phase. With the new Budget set to come out, developers, home buyers and banks have hopes of new policies which would aid revival of the sector.
A lot of focus will be on the passage of the Real Estate Regulatory Bill, which, by ensuring mandatory disclosure of the details of all registered projects through a real estate regulator should help boost customer confidence and develop good relationships between the builders and home buyers.
From a home loan perspective, the government may look at increasing the tax deduction limit for housing loans, which should give the fledgling industry a much needed shot in the arm, especially in metropolitan cities like Mumbai where the average ticket size dwarfs the Rs 2 lakh exemption limit for self-occupied property under section 24(b) currently in play.
The government’s move to spend USD 15.3 billion on smart cities should have a strong positive impact on the real estate sector. Developers will be able to offer new projects in the upcoming cities - boosting the regional, social and economic infrastructure. We need to wait and watch whether additional benefits will be passed on to builders and Housing Finance Companies (HFCs) for infrastructure projects taken up in these cities.
Financial protection from project delays is another pressing need which can be allayed if the Union Budget provisions for allowing tax benefits for home buyers from the time they start paying interest on home loans. This should ease their monetary burden and increase the number of home loan disbursements.
We would also expect that affordable housing remains a top priority in the upcoming budget. Section 80 IB (10) which allows 100 percent tax exemption on housing projects with certain limit of built-up area should also include affordable housing. Tax sops for affordable housing and loan restructuring capabilities could further boost the real estate market as well. In addition, the government might also consider providing concessional rates for home loans involving projects in the priority sector.
Lastly, from HFC perspective, getting infrastructure status has been a long pending requirement from the real estate industry, which would enable developers to avail finances at cheaper rates and consequently, could also attract more foreign direct investment (FDI) in the sector. A special provision should also be made for attractive mortgage guarantee schemes to enable adequate supply of services in every corner of the industry.
(The author is the Managing Director of Tata Capital Housing Finance Limited)