Realtors' body NAREDCO on Tuesday demanded that the Centre should take some steps in the coming Budget to boost liquidity in the sector post NBFC crisis and create a Rs 2,000 crore dedicated fund to complete stalled projects.
On the GST, the association welcomed setting up of a group of ministers (GoM) to consider rationalisation of rate. It demanded that the GST should be brought down to 5 percent with input tax credit (ITC) for affordable housing from 8 percent, while for other projects the rate should be 8 percent with ITC from the present 12 percent.
"After the implementation of realty law RERA, the amount of fund required to develop a project has gone up three times as 70 percent of the money collected from sales needs to parked in an escrow account. NBFCs were funding the sector in a big way to meet this increased fund requirement," NAREDCO's President Niranjan Hiranandani told reporters while discussing pre-budget memorandum submitted by it.
"After the liquidity crisis in NBFCs post IL&FS, we are in a quandary," he said, adding that the association has written to the finance ministry and the RBI to improve liquidity situation in the real estate sector.
It is "definitely a crisis situation" faced by the industry, Hiranandani said.
NAREDCO Chairman Rajeev Talwar said the government should rationalise the GST rate to boost sales of under construction flats.
Hiranandani said the lower GST rate would not affect tax collection. "Customers are postponing their buying decision as completed units do not attract GST if the project has completion or occupancy certificate".
On stressed assets, the NAREDCO President demanded that the government should "intervene" to help complete stalled projects of developers having negative net worth.
He pointed that there are 2.5 lakh home buyers in NCR who are stuck in such projects and the number in other cities are not much.
The stressed fund should be the size of Rs 2,000 crore to kickstart construction in the stalled projects, Hiranandani said, adding that additional funds would come from sale of unsold units, customers collection and monetisation of surplus land with the developers concerned.
"The fund infused initially by the government can be easily recovered," Hiranandani said.
The association's Vice-President Parveen Jain spoke about the need to promote rental housing as it is being done to help people in owning a house through different schemes.