+91 20 2616 1111 
The Finance Minister will present the Budget on February 28, and the real estate industry has high hopes.
The government’s latest forecast suggests that GDP growth should remain around 7.5-8 per cent this year. This trend is attributed mainly to consistent performance shown by the services, agriculture, infrastructure and construction sectors.
According to the recent BRICS report by Goldman Sachs, India will remain one of the fastest growing economies after China. Manufacturing and services will continue to lead the overall growth rate. The commercial real estate sector has already been witnessing a tremendous upturn. There is huge demand for quality space across metros. Primary cities like Mumbai, Delhi, Bangalore, Chennai, Hyderabad and Pune have recently attracted sizeable investments by IT/ITeS companies. Last year, approximately over 20 million sq feet commercial space was acquired in this sector.
The domestic residential market continues to be buoyant, mainly because of easy availability of funds, low interest rates, tax incentive and strong economic indicators. A bull run in the capital market is on. Funds are being diverted to real estate not only for hedge purpose but also to realize an assured return in the range of 10-20 per cent including capital appreciation. Needless to say, developers strongly believe that the Finance Minister must continue with reforms.
Speaking on micro issues, city –based developers say the government must extend deduction under sections 80-IA and 80-IB, both of which are extremely beneficial for the industry. Section 80-IA allows 100 per cent deduction to developers of IT parks and special economic zones for ten years. Similarly, section 80-IB states, “The amount of deducted in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2007, by a local authority shall be 10 per cent of the profits derived in the previous year relevant to any assessment year from such housing project.” While there are certain conditions to be met, they are both beneficial.
Manish Jain, MD, Kumar properties believes that introduction of section 80-IB was a good move. “It gives exemption to housing projects larger than one acre or with apartments below 1,500 sq. ft. It is a good move. But with the passage of time and actual implementation, the provision has been misused, “he states Jain adds that ideally the government should consider all residential projects, the economy will benefit and the incentives will percolate to the consumer,” he says.
Lalit Kumar Jain, president of PBAP and chairman, Kumar Builders, feels the government
Should concentrate on the 80-IA scheme. “It expires on March 31, 2006. It needs to be extended; otherwise small IT parks below 25 acres will not come up. A lot of international businesses will be affected,” he says.
The wish list includes relaxation for investing in second homes; recovery of service tax on rental income should be reduced. The list is exhaustive, if not endless.
Manish Jain says that the government must do away with service tax on the real estate industry. “We sell houses, hence it should not attract service tax,” he says. Lalit Kumar Jain points out that despite so many tax concessions, 80 per cent of the urban population still can’t afford a new house. “If we want to turn things around on this front.
We should look at promoting rental housing and easing the norms for housing loans.” He adds that the deduction limit of Rs. 1.5 lakh on interest towards housing loans should be done away with. “Also the capital gains or taxes should be nil for the housing sector,” he firmly points out.
Rohit Gera Executive Director, Gera Developers, points out that the long-term capital gain in real estate should be treated at par with the long-term capital gain in stock markets.
Lalit Kumar Jain believes the government must encourage people to buy multiple homes, so they can be given out on rent. It can be noted that tax benefits can be claimed only for one house. As for the other houses, whether or not they have been let out, reasonable rent is computed and taxed accordingly.
The wish list also includes giving large real estate projects the status of infrastructure projects and tax benefits accordingly.
Annirudh Deshpande, MD, City Development Corporation, points out that the issue of granting infrastructure status to 100-acre townships has already been represented to the Urban Development department. : Building a large township without proper infrastructure is impossible. If this bill is passed, the infrastructure status will reduce the prices of housing,” he says.
An important point in the wish list is allowing the developers to float real estate mutual funds. “The time is right for the government to pass such a policy,” stresses Gera.
R Vasudevan, MD, Vason Engineers strongly believes that the government should concentrate on giving importance to the growth of IT sector and infrastructure developments, which in turn would lead to growth of the real estate industry.
Ashok Kumar, principal and MD, CRESA Partners India, an international corporate real estate advisory firm, sums it up well. “Keeping the on going developments in mind, the government must continue with tax rebates on housing loans and bring about rationalization in the stamp duty structure. FDI in commercial space and retail, with proper checks and balances, should be encouraged,” he says. He adds that development of SEZs, infrastructure support across country will be a crucial factor. On the macro level, the government should continue with the ongoing reform process.
5-Year Warranty on Real Estate
