The unfettered victory of the UPA will make it simpler for this government to go ahead with real reforms and take a long-term view of economic growth.
The real estate sector in India has seen a major meltdown over the last eight to nine months and needs serious attention from this government, especially as the urgency to tackle pressing issues such as the shortage of low-cost housing increases with every passing year.
On the macro front, there are legislative changes that have to be made to give a boost to an industry starved of liquidity that seriously threatens to hamper growth.
I look forward to some policy changes that could give the real estate sector and housing, in particular, a much needed shot in the arm.
The previous government, in a bid to prevent the creation of an asset bubble, had made it clear that commercial loans would not be available for buying land. While it was fully justified in taking this decision, it might now be prudent to take another look at the policy.
The fact is that most developers are now starved of liquidity. Therefore, the government can tweak its policy to allow developers, who focus on low cost and affordable housing, to access funds from commercial banks. While this will help incentivise developers, it will also fulfil a long-standing social need.
There is also a strong case for extending the benefits under Section 80IB of the income tax act to developers which will encourage them to to invest in this sector.
There is also a need to do away with the ambiguity regarding the continuation of the software technology park act.
Similarly, the SEZ policy needs clarity and many loose ends need to be addressed. For example, it needs to be clarified whether housing within an SEZ should be made available only to the residents of such a conclave or to outsiders as well, and, if yes, to what extent.
The government may also tackle the macro issue of interest rates in the short term. The interest rates on mortgages are still very high — at a weighted average of roughly 12-13 per cent.
The irony of the whole thing is that while developers are facing a liquidity crunch, Indian consumers are unable to get access to reasonable interest rates.
As an industry, we borrow at prohibitive rates of 14 and 15 per cent.
The rationalisation of stamp duty and registration will make a big impact on the sector. There is a need to have one slab in place across states and do away with the differentials in the percentage of stamp duty that is levied by individual states.
Having said that, it is also imperative to bring down stamp duty rates in line with a fall in realty prices to encourage home buyers and kickstart the sector.
Also certain states have huge licence and developmental fees which are passed onto consumers, like in Punjab and Haryana, leading to higher end user prices.
Given the current situation in the industry, a major policy rethink is required to kickstart demand as well as to help the government address long-term needs such as low-cost housing.
I would like the government to incentivise real estate companies that adhere to green building norms which would go a long way in reducing carbon emission standards in the construction and real estate sector.
Source:The Telegraph