This Q&A first appeared in DNA Money edition on Wednesday, Feb 20, 2013.
Brotin Banerjee, MD and CEO of Tata Housing, says last year’s story was one of mixed industrial data and a slump across industries, including realty. With the Union Budget 2013-14 fast approaching, the property sector is renewing hopes that any new measures may help overcome fears of sluggish growth continuing next fiscal. Excerpts from an interview:
On affordable housing:
The Budget should provide sops and tax rebates for affordable housing projects along with interest subvention of 5% for the low income groups and economically weaker sections. Extension of scheme of interest subvention of 1% on housing loan up to Rs 15 lakh on homes costing up to Rs 25 lakh should be continued. Excise duty reduction on cement and steel to lower project costs and expansion of the interest subsidy on loans will prove to be necessary tools to boost developers’ interest in the affordable housing segment.
On fiscal policy:
A few weeks ago, the central bank announced its first policy rate cut in nine months. Although that has brought cheer, the fact remains that 2012 can be aptly described as a slow year. Real estate consultancy firm Jones Lang La Salle says that the launch of real estate investment trusts (REITs) or real estate mutual funds (REMFs) in 2013 will drive investor demand across cities. This will allow investments in rental housing and this will be a first for the sector. Mandated bank support for project development is required to ensure timely completion of projects.
Tax measures such as increasing the limit of interest deduction on home loans from Rs 1.5 lakh to Rs 3 lakh will provide necessary motivation to consumers to increase buying activity and revive demand. Raising the income tax exemption limit to Rs 3 lakh will lead to more disposable income available for domestic investments.
Increase in service tax and excise duty by 2% in the last Budget has put pressure on project costs, raising the unit costs by 4-5%. As a result, high cost of construction has impacted demand and is proving to be a deterrent for both sides. To revive demand and control rising property prices, government should consider lowering of service tax and excise duty.
On Real Estate Bill:The introduction of legislation such as the ‘Real Estate Bill’ is expected to increase transparency and boost investor confidence in the Indian market. We continue to advocate the formation of a regulatory authority for the sector which will ensure planned and transparent development and protect the interest of the customers. Another recommendation would be the establishment of a single-window clearance for construction projects.
On raising funds:The Reserve Bank of India also allowed real estate developers and housing finance companies to raise up to $1 billion through external commercial borrowing (ECB), a move that is expected to make funding more accessible, especially given the current regulatory and reform environment.