Anil Pharande, CMD – Pharande Spaces:
From the real estate sector’s perspective, there are many aspects that the Union Budget should address this year. One of the foremost is further reducing the bureaucratic red tape involved in project development. Expedited clearances for a larger segment of residential projects will be a key for reducing project delays. An announcement that streamlines the process of obtaining clearances will go a very long way in boosting the real estate industry.
We also expect the budget to make announcements regarding the regulation of construction material costs. While inflation may have come down, the cost of construction has not followed suit and many developers with less capitalization have been forced to slow down or halt their projects because of this. The costs of raw materials such as cement and steel need to be brought down or an upper ceiling imposed on their prices.
The Union Budget 2015-16 should remove the multiple taxes that are associated with home purchase. As of now, home purchasers are required to pay service tax and value-added tax (VAT) on top of stamp duty and registration charges. Goods and Service Tax (GST) should be introduced in the place of these taxes. Also, the real estate industry expects the Budget to finally make the Real Estate Regulatory bill a reality this year, so that the industry has the benefit of an apex body via which all concerns can be addressed transparently and efficiently.
Another expectation from the Union Budget is that it will announce a reduction in the cost of property registration. The recent hike in ready reckoner rates in Maharashtra has been a sentiment setback for the real estate sector. Stamp duty and registration costs are as high as 6% in most cases, and this needs to be reduced by a few base points to aid consumers. Alternatively, a slab-based approach should be introduced. Stamp duty falls under state government purview, but the Center can nevertheless issue a directive to reduce stamp duty costs.
We real estate sector was cheered by the recent cut in interest rates, but it was by itself not sufficient to amount to any real advantage to home buyers. The Union budget should bring a significant decrease in interest rates on home loans. The Ministry for Urban Development and Housing had made it clear that it would maintain a sharp focus on reducing home loan interest rates, and the budget will hopefully bring firm evidence of this focus. Developers, home buyers and banks are all keenly awaiting such an announcement, which would bring with it a significant revival in sentiment.
Also, the budget needs to do something to bring down the cost of borrowing for developers, because raising capital for development of new projects remains a huge challenge. Lending rates for real estate development currently range between 12-14%, and raising funds through other sources is even more expensive. The interest rates on lending to real estate developers should be brought down so as to help rationalize the cost of construction. This would also help in bringing down property prices.