Budget 2019: The Real Estate Sector Wants Liquidity Concerns Addressed

Days ahead of the Union Budget 2019, prime minister Narendra Modi has hinted at what to expect on July 5, 2019, the day when Nirmala Sitharaman presents her maiden budget as the finance minister. While agriculture, manufacturing and exports may be the focus areas of this year’s budget, real estate, the second-biggest job creator in the country, expects an equally fair treatment from the new FM. 

So, what do developers expect from this year’s budget? 

Speaking on behalf of the sector, Niranjan Hiranandani, president, NAREDCO, explains that the “Liquidity crunch is taking a toll on the health of companies and further inflicting financial damage. Quick corrective steps should be undertaken by apex bodies and government to pump in enough liquidity in the system to bring economic growth on track.” 

Those within the industry have also been asking for stress funds for defaulting companies which haven't been able to complete their projects because of lack of funds. Madhusudan G, chairman and managing director, Sumadhura Group, says quick steps should be undertaken by the government to infuse adequate liquidity into the system.

Given the numerous clearances that projects have to receive once they are planned, the real estate sector’s demand for industry status and single-window clearance is a justifiable one. “These steps will greatly reduce the project timelines for developers and help them procure funds at a much better rate. In the long-run, it will help reduce the input cost of construction involved, thereby, making the final product viable for the end consumers,” shares Madhusudan. 

Before and after the launch of the GST, there has been a demand to rationalise taxes. Hiranandani asserts that the need of the hour is “Rationalisation of taxes by subsuming stamp duty in the GST, extending Input Tax Credit to the commercial segment, reducing corporate tax, and abolishing of MAT to provide an impetus to SEZ developments.” 

A lot of PMAY beneficiaries are happy that policies regarding the scheme will not change given the re-election of the government. However, it is also a reality that the pace of PMAY implementation has not been as expected. Developed countries boast of a robust rental housing policy, and for India to move towards housing for all, it needs to adopt the same policy so that there is a roof over every head. “The FM will have to pay attention to the Input Tax Credit as well, otherwise it will be a direct hit on affordable housing since the house will become even more expensive and will be out of the common man's reach,” points out Pradeep Aggarwal, co-founder and chairman, Signature Global. 

Considering the spurt in co-working spaces, Manas Mehrotra, chairman, 315 Work Avenue, expects that the government would enable them to claim input credit on work contracts and construction services supplied, as per GST provisions. “This would check the increased outflow of cash that co-working firms are currently experiencing. The firms are hoping that input tax credit under GST be extended to developers so that it is passed on to companies who lease out space and thereby, reduce their overall costs. This would significantly aid faster growth of the co-working business in the country,” he says. 

Co-working firms are also expecting that the government would curb or altogether eliminate the angel tax this budget as it would enable the firms to lease more spaces for start-ups, enterprises, MSMEs and entrepreneurs. Angel tax would destroy the start-up edifice and indirectly, co-working firms would desist from leasing co-work spaces, Mehrotra adds. Co-working firms are also hoping that bank funding limit for start-ups, would be enhanced from Rs 25 lakhs to Rs 1 crore to make available greater financial resources to start-ups. 

While the sector’s wish-list is long, Surendra Hiranandani, founder-director, House of Hiranandani adds a few other demands to the list like, “The elimination of taxes on vacant property, dropping the circle rates section from the Income Tax Act, ensuring tax rationalisation on REITs and lowering costs of land acquisition, etc., to positively impact the sector.”