Budget 2023: Grant infrastructure status to real estate sector to facilitate long-term funding, says Niranjan Hiranandani

Niranjan Hiranandani, Managing Director, Hiranandani Group

Budget 2023 should focus on putting more money in the hands of homebuyers to boost real estate sales, says Niranjan Hiranandani, founder and managing director, Hiranandani Group and vice chairman, NAREDCO. For this, the government should consider expanding the deduction available for home loans under Section 24 (b) from Rs 2 lakh to Rs 5 lakh. The last increase in the deduction limit under Section 80C (to Rs 1.5 lakh a year) was in 2014. To ensure that funding options are available to real estate developers for a longer duration, especially for larger real estate projects, the government should consider giving infrastructure status to the sector, Hiranandani tells Vandana Ramnani. Edited excerpts from the interview:

What are real estate developers expecting from Budget 2023?

We are looking at infrastructure status as we require long-term funding for large-scale township projects. This will help us avail long-term cheap credit to deliver affordable projects. To boost housing absorption, the Budget should offer personal tax relief. This could include expanding the deduction available for home loans under Section 24 (b) from Rs 2 lakh to Rs 5 lakh. Such an incentive will stimulate demand and lessen the housing deficiency in the nation. The last increase in the deduction limit under Section 80C (to Rs 1.5 lakh a year) was in 2014.

Also, the loan-to-value ratio should be raised to 90 percent, as India has a record-low NPA of 2 percent. This is because nearly 60 percent of homebuyers repay their home loans within 7 -8 years.

The long-term capital gains tax for equities is one year and three years for real estate. Both should be brought at par. There should also be long-term capital gains tax benefit to buyers wanting to sell an old property and reinvest the proceeds in more than two properties. We have recommended amendments to the provision of deductions under Sections 54 and 54EC. According to Section 54, a person who sells a house can be exempt from paying capital gains tax if they use the sale proceeds to buy or build two homes. The body has proposed that the rule needs modification so that the amount can be used to purchase three properties. Also, loan up to 90 percent is currently available for affordable housing projects worth up to Rs 45 lakh. This limit should go and these loans should be made available for properties in the range of Rs 45 lakh to Rs 1 crore.

Several developers have started launching IPOs; macro and micro developers are looking for joint ventures and joint developments. Have funding models evolved after COVID-19?

There are several funding models available to developers today. They can take a bank loan, raise finance through an IPO, enter into a joint venture with the landlord, dip into an Alternative Investment Fund and go for a sharing partnership, especially in case of redevelopment. The redevelopment projects are gaining ground under the revenue-sharing model as micro and macro organised players sign up for acquisition and mergers. The new model helps the branded players to spread their footprints into the newer geographies with ease of entry and exit that enables quick turnaround of the projects. It is also all about opportunities. We (Hiranandani Group) ourselves are looking at several redevelopment opportunities in the Mumbai region.

To what extent has your company expanded its footprint outside Mumbai?

Hiranandani Group has multiple township projects in Mumbai, Navi Mumbai, MMR, Chennai, Ahemdabad and Pune. The Chennai township is being developed on owned land whereas GIFT IFSC has been developed on the land bought from the GIFT Authority. The Greater Noida data centre is built and operational on land allocated by the state government. The group is actively evaluating redevelopment and joint venture projects across key locations.

There has been an increase in traction among non-resident Indians for realty buys of late. What kind of projects are they looking at?

In order to capitalise on currency depreciation, they are seriously considering and investing in boutique apartments of 1 and 2 BHK configurations that fetch higher rentals. Domestic buyers, on the other hand, are upgrading to spacious luxury apartments. We are responding to the changing needs of all our customers, providing them with an a la carte menu if I may say so.

Have you approached the Maharashtra government for further cuts in stamp duty?

Yes, we have approached the state government and proposed that stamp duties be reduced by half to boost sales. Fiscal stimulus acts as a decision-making enabler for the fence-sitters, which helps expedite the sales velocity on the ground. In the current geo-political scenario, global economies are grappling to quell soaring inflation. The cost of credit borrowings has escalated, which is dampening the homebuyers’ propensity to buy. Fiscal sops such as stamp duty and registration waivers, tax incentives and credit subsidy schemes should be extended to a larger segment of homebuyers. This will keep the sales momentum steady in FY23. The sector has submitted its recommendations to the government for introducing incentives for the real estate sector.

A recent report has said that 40 percent of projects delayed in Maharashtra comprise 'new' projects launched after MahaRERA was set up. Is that an area of concern? What more needs to be done to strengthen RERA in Maharashtra and ensure that projects are completed on time?

The lapse in new project registration under MahaRERA could be due to multiple issues like lack of timely compliance and delays in project registrations. Also, it is imperative for the regulator to identify the reasons for ongoing project registrations getting lapsed. As the economy continues to expand in a globally uncertain environment, the real estate sector will continue to face such challenges. This will impact project commissioning, execution and deliveries. It is for this reason that statutory and government approvals should also be brought under the purview of RERA.