Finance Ministry officials maintain that budget wish list of developers are unrealistic.
“Most of the suggestions and demands of real estate sector are so unreasonable that it cannot make room into the Union Budget. It seems the developers have either not learnt from their refusal in the past or they simply do not believe in any homework before they ask for their demands to be considered in the Budget,” says a Finance Ministry official requesting anonymity.
There is a general belief in the power corridors that the consensus eludes even among the developers as to what should be their demands with the Finance Minister. As a result, in the absence of an effective policy advocacy the Union Budget turns out to be just a customary event for the sector.
Every year on the eve of Union Budget the real estate sector in its collective spirit gets so over-charged with the list of expectations that they fail to differentiate between wants & needs. More importantly, here is always a huge chasm between what is feasible for the Finance Ministry to offer and what is being demanded by the sector.
This failure of understanding on part of the torch bearers of the sector who are on the forefront of policy advocacy often leaves the sector high & dry on the day the Union Budget is announced.
On the eve of Union Budget 2016-17 the story seems to be no different as there are routine demands of granting an industry status; something that is not even being considered by the government. The industry body National Real Estate Development Council (NAREDCO) has nevertheless asked the government to grant industry status to the real estate sector to enable it to recover from severe slowdown.
“Industry status will attract large companies and most importantly inculcate ‘corporate culture’ and ‘industry discipline’ which will immensely benefit economy in general and consumers in particular,” said NAREDCO President Parveen Jain in a pre-budget Memorandum to the Government.
However, in such carpet bombing demand year after the year some legitimate previous demands like infrastructure status by adding a clause to the definition of ‘infrastructure facility’ u/s 80IA of IT Act 1961 gets lost. Even the demands for tax incentives to the homebuyers to revive the housing demand are less vocal than industry status.
Brotin Banerjee, MD and CEO of Tata Housing, however, believes the government should grant infrastructure status to integrated townships so that banks are able to give priority sector lending to the sector. Incentives and special benefits to green and sustainable technology and methods of construction should also be addressed in the upcoming budget.
“Real estate sector continues to be plagued by the issue of double taxation and tax complications which drive up the cost of construction and eventually make housing more expensive for consumers,” says Banerjee.
Analysts point out that it would do much better for the sector to focus on demanding infrastructure status as of now. It is also required that there is demand for the Budget to encourage demand by increasing the deduction available for interest on housing loans from 2 lakhs to 3 lakhs per annum in keeping with interest rates which are still high despite successive rate of interests last year which are yet to be translated by banks.
There are, however, many voices within the sector vis-à-vis their Budget wish list and as, the Finance Ministry official says, realty proposes & government disposes in the Union Budget which is being followed by foul cry year after the year.
