While the Indian realtors have often cribbed on the issue of under representation of the sector in respective budget, they have seldom admitted the fact that the real estate has been a divided house over their wants and needs. Navin M Raheja, MD, Raheja Developers suggests a way out and asserts that tax sops given to real estate will actually increase the government revenue. He believes if steps are taken for the growth of the industry there is backward and forward linkage of more than 250 industries which includes steel, cement, electronic, infrastructure, hospitality, industrial development, banking, creation of disposable income and will also increase the employment in the country. In an exclusive interview with Ravi Sinha he shares his budget wish list and a wide range of issues affecting the sector. Excerpts of the interview:
What is your budget wish list?
For the last two years, we are representing to the government on certain points/issues which we would like to get addressed in budget and they are: extension of tax holidays on EWS and LIG housing under section 80 IB, upward revision in interest on home loan deduction limit, reintroduction of standard deduction, industry status to real estate, extension of JNNRUM and RAY scheme and to include private developers for this purpose, rationalization of stamp duty, allowance of ECB in reality sector, nationalization of financing norms by RBI.
What are the issues the affect the sector in the budget?
In real estate most important issue is availability and accessibility to cheaper finance and incentive to home buyers particularly in LIG and MIG segment. In the past 6 months, the home loan and project financing rates have gone up substantially and it is expected that it will further go up. In this scenario if government will not give the incentive to the home buyer, the demand may come down and sector will be badly affected.
What are the issues that Finance Minister should consider for the end-users?
FM should consider that the tax payers should get incentives for buying homes and that is possible only when they have the disposable income. As real estate industry is demanding upward revision in interest on home loan deduction and rebate in repayment of home loan under section 80 C, the buyer will have incentive to buy house even if the interest rate goes high.
Have you given any memorandum or presentation to the Finance Minister?
Yes, we have given memorandum to FM through FICCI, ASSOCHAM and ministry of Urban Development.
Do you think realty sector gets under represented in every budget?
Yes, the FM has always ignored the industry requirement. In fact, when industry was struggling from a deep recession, the FM had imposed service tax on real estate and increased the provisioning norms of banks from 0.40% to 1% which has resultant into increased cost of 5-6% and not only this, the state government is considering to impose VAT on real estate as well because of imposition of service tax. This will again increase cost by another 7-8%.
What are the reasons for its under representation?
In our opinion FM feels that incase tax sops are given to real estate, the Government may end up losing substantial revenues. But we feel this will increase the revenue if steps are taken for the growth of the industry as there is backward and forward linkage of more than 250 industries which includes steel, cement, electronic, infrastructure, hospitality, industrial development, banking, creation of disposable income and will also increase the employment in the country.
Secondly, real estate is a state subject hence, the urban development ministry at central level does not have much to say in real estate development. This is also one of the critical reasons why industry is always underrepresented.
Don’t you think in the absence of concerted efforts, there is always a gap between what the sector wants and what it needs?
Of course, we agree that there is a wide gap between what the sector wants and what it needs. The developers are trying hard to represent and convince the finance ministry on what they want but we feel due to lack of proper coordination between state ministry and central ministry, the issues have not been conveyed to the finance ministry. We also feel that respective state governments should represent to the Finance Ministry about the wish list of developers in their respective states.
