Union Budget must focus on economic growth by boosting real estate: NAREDCO

New Delhi: Fiscal stimulus to the real estate sector will have a manifold affect on 269 allied industries with multi-dimensional impact on enhancing the GDP growth inclusive of employment creation, the National Real Estate Development Council (NAREDCO) said on Wednesday.

"It will play a pivotal role in achieving an ambitious target of five trillion dollar economy," said its National President Niranjan Hiranandani. "Hopefully, the Union Budget for 2020-21 will offer fresh stimulus for real estate as the sector has to deal with a series of disruptions."

Reducing and rationalising taxation rates is an opportunity for creating a disposable surplus in the hands of the citizen. "This will go a long way in pushing consumption, effectively enhancing turnover for industries across the economy," he said.

Similarly, said Hiranandani, real estate developers also need support in the form of revised norms for loans. "If real estate gets a boost, it will positively impact the economy. NAREDCO hopes that the upcoming Budget will encapsulate major positive measures for one of the core sectors for growth acceleration."

Real estate industry has been facing serious challenges related to the liquidity crunch, which needs bold fiscal measures. The industry has been demanding a restructuring of loans or one-time rollover in case of the stressed assets at the options of banks.

"In such cases, a borrower should be allowed to retain asset classification of the restructured standard accounts as standard and the same will not be treated as a non-performing asset," said Hiranandani.

He said interest rates on home loans should be reduced to 7 per cent per annum, and the benefit of rate cut should be transmitted to end-users to revive the demand.

Besides, reduction in stamp duty by 50 per cent for all real estate transactions registered on or before March 31 will induce fence-sitters to turn into the actual home buyers, spurring the demand and consumption.

With rapid urbanisation and migration, said Hiranandani, there is a need to develop a robust rental housing model with tax incentive.

The definition of affordable housing was recently amended in GST and income tax laws. As a result, the affordable tenement has to meet the dual condition of area and also the price cap of Rs 45 lakh.

Almost all houses in the Mumbai Metropolitan Region, National Capital Region and other metros do not qualify as affordable housing, resulting in the loss of benefit of reduced GST rate of one per cent and also the benefit of tax exemption from such projects.

"We recommend that the condition related to price cap of Rs 45 lakh be immediately abolished and benefits be restored to all the houses which have an area less than 60 to 90 square metres," said Hiranandani.