The real estate industry is looking forward to the Finance Minister to finish a job half done in the first nine months of its five-year tenure.
While the government moved forward to allow real estate investment trust (REIT) a realty in India, stakeholders are still waiting for taxation issue, which remains pending, before it takes off in earnest. On the other hand developers are hoping to see some concrete incentives to go along with the plan to have housing for all and a push to low-cost housing projects.
In particular, experts expect the government to offer relaxation on taxation issues to bring REIT norms at par with those in other Asian markets.
“An important area to look at is to create a level-playing field for domestic and offshore investors participating in the market. Plus, clarity is sought on tax structure that guides consolidation of assets and distribution of income,” said Jasmeet Chhabra, managing director, Red Fort Capital, a key real estate PE investor.
Sunil Jain, managing partner, at advisory firm Sprout Capital, said, “We need clarity on taxation for holding company, dividend distribution layer and income distribution. There is some clarity when it comes to unit-holders but from sponsor's perspective a lot is required to be done.”
Real estate private equity investors also want a rational and stable tax regime across different investment platforms.
The realty PE fraternity also want the government to rationalise tax structure around alternate investment fund (AIF) to make it more attractive for investors.
This is especially for expanding the scope of capital source. “We expect the government to bring down minimum investment limit (for HNIs investing in realty PE funds) to Rs 25 lakh from Rs 1 crore to allow broader level of participation,” said Navin Kumar, executive director, Milestone Capital.
Sunil Rohokale, chief executive officer, ASK Group, expects the government to issue clarification and simplify of foreign direct investment guidelines to attract greater level of capital in India, apart from a stable tax regime in terms of REITs.
“Additionally, to maintain long-term interest and attract savings in to residential real estate, first time home buyers should be given incentives through tax rebates. If we want to provide housing for all by 2022, there should be enough push by the government in terms of tax benefits and incentives to buyers and developers of affordable housing,” he added.
The incentives for boosting affordable housing projects is something which tops the project developers wishlist.
While the government has spelled out its vision of housing for all by 2022, the fraternity wants tax rebates to make it a reality. North-based real estate major Supertech suggests to exempt affordable projects from income tax clutch. “Under 'Housing For All by 2022' push, the apartments that are under or of 1,000 sq ft should be exempted from the Income Tax Act 80I (B) as that will benefit end users considerably."
“In addition, to boost affordable housing segment, taxes should be rationalised especially on stamp duty and service tax front," said Prabhat Ranjan who recently forayed into affordable housing through Olympeo Infrastructure. He added that home loan rates should be brought below 7.5 per cent and lending rates below 10 per cent.
Stakeholders maintain their long-term demand to grant infrastructure status to affordable housing to let the players access capital for project financing with ease.
Getamber Anand, president (elect) of industry body CREDAI and chairman & managing director, ATS Group, points to another challenge being faced by the community. He says that individuals are taxed on assumed income if there is a disparity in value of house and the circle rate in the area.
“That needs to be scrapped because the revenue departments of all state governments across the country have started increasing the circle rates unjustifiably just to increase the revenue of the stamp duty collection and this has actually setback the entire industry," he said.
Some of the long-standing demands of the stakeholders include industry status for real estate and single window clearance for projects.
Click here to read the wishlist of fraternity in the last budget.