The real estate industry, which is witnessing a revival of new launches and private equity transactions, is keenly awaiting the Union Budget for 2013-14 to see if its long-standing demand to securing infrastructure status will bear fruit.
If the demand is met, it could mean faster and cheaper access to loans from banks for development of realty projects, industry players said.
Khushru Jijina, managing director, Indiareit Fund AdvisorsPvt Ltd, said, “Granting infrastructure status to real estate, in turn would directly enhance the availability of funding under the foreign direct investment (FDI), External Commercial Borrowing (ECB) and domestic bank lending routes. Implement ‘REIT’ guidelines; this would bring much needed liquidity to the commercial market and also enable both foreign and domestic retail investors to access real estate as an asset class on a unit by unit basis with an appropriate open market exit mechanism.”
Since pass-through is not applicable for AIF Category II under which real estate funds come into play, the current regulations are also creating havoc in that space. Commenting on this, Bikram Sen, director and CEO of Arthaveda Fund Management, said, “Government needs to give us total clarity on pass-through status and tax applicable to the investors. Earlier, under VCF, it was allowed to everyone but it is not the same with AIF. Because of that, it is creating havoc in income tax claims.”
The housing industry has a shortage of 18 million houses in the country and to expedite the process last year government has allowed real estate firms to raise money through external commerciall borrowing (ECB) for development of low income housing (LIG).
Sanjay Dutt, excutive managing director of Cushman and Wakefield, said, “The RBI and the government now must recognise the contribution of the Indian real estate sector to the economy. The government needs to reform itself before thinking of regulating the sector more. For the urban and rural poor, the income tax deduction under Section 80-IB should be re-introduced in the Parliament in order to generate interest of developers in Low Income Group (LIG) and affordable housing where demand exceeds supply substantially”.
Dutt said the budget should focus on extending interest subvention for affordable housing, which was 1 per cent on housing loans of up to Rs. 15 lakh. This will continue to have a positive impact on residential sales in small cities and towns and peripheral locations of major metros where the units are priced up to Rs. 25 lakh.
(Edited by Prem Udayabhanu)