According to Mr. C Shekar Reddy, National President, CREDAI, the
real estate sector is enthused by the government's ambitious 'Housing for
all' policy and seeks definite directions on the policy front in the
upcoming budget. The success of any effort on providing housing
for all requires mechanisms for adequate funding for low cost buyers
and for developers as a prerequisite.
While
long-term mortgage market is well developed for middle and high income groups,
customers falling under low and moderate income groups find it difficult to
access finance. Even access to capital for developers too is highly under
served.
Mr. Reddy further adds that though Housing Finance Companies
(HFCs) exist to address this segment, their funding limits need to be
augmented. Currently, as per RBI guidelines, HFCs, registered with National
Housing Bank (NHB), can offer loans below Rs 25 lakhs for a property
value below Rs 30 lakh. These HFCs should have a minimum net
worth of Rs 300 Crores for each of the last three years. Specialized
HFCs who are funding low cost Housing will not meet these criteria and they
should have an equal opportunity to access External Commercial Borrowings
(ECBs). As of now, ECB for HFC is permitted under the approval route and
we urge the government to move it to automatic route. Currently ECB for
Construction Finance to Developers is permitted only under
approval route; CREDAI recommends that ECB approval be moved to the
automatic route with certification from a reputed Architect for the plans which
meet the criteria of Affordable Housing definition.
 |
| C Shekar Reddy, National President, CREDAI |
Putting emphasis on the need of better lending policies, Mr.
Reddy says that there is a need to redefine the Priority Sector Lending (PSL)
status. Today, only housing loans below Rs 25 Lakhs in metros qualify
PSL. There should be uniform definition of PSL as construction costs are more
or less similar across the country be it metros or rural areas.
On the
same note, considering spiralling inflation, the PSL limit for
housing should be raised to Rs 35 Lakhs and the annual increase be
automatically pegged to the WPI.
While direct loans from banks are considered priority sector,
loans given by banks to HFCs for onward lending are eligible for PSL tag only
if they are less than Rs 10 lakh. The objective of these policy measures
must be to support flow of funds to low and moderate households and the policy
should be agnostic to the structuring of the lending, whether it is direct
lending to the customer or indirect lending through an HFC.
According to Mr. Shekar Reddy, real estate sector is looking
forward to the Exemption of Service Tax for housing projects. The transaction
taxes inclusive of the service tax, VAT, Registration and stamp duty etc for a
buyer has sharply risen over the past few years and therefore need to be
brought down from 30-35% presently to about 15%, which will make
housing affordable for all. Also, BJP in their manifesto included interest
subvention and rationalization of taxes; we request an interest
subvention of at least 3% for 5 years to be extended for Dwelling Units of
less than 80 Sq. mtrs for fulfilling the ambition
of Pucca Houses for all by 2022. This will increase
the eligibility of quantum of loan amount to the purchaser and help reduce
the EMI burden on the Home loans.
He further said that the concept of NOCs are stopping the growth of the
country, making Houses costly by about 40% due to delay in getting
project Approval etc, it is recommended that NOCs to be completely eliminated
to make online approvals implementable and successful. MOEF clearance to be
made simple and applicable for a city master plans as a whole and not for
individual projects. Civil Aviation Ministry should prescribe allowable heights
for projects on the digital Master Plan of city and similarly Buffer Zones to
be earmarked on Master Plans for Monuments, CRZ, Railways, and Defence etc
instead of individual NOCs from the Departments.
Speaking on the much awaited demand of infrastructure status for
the real estate industry Mr. Reddy pointed out that the Infrastructure Status
should to be extended to Housing and Real Estate Sector to enable access to
funding from banks and other financial institutions at a much lower
cost. Construction loans for low cost or affordable housing must be eligible
for PSL status as it would allow developers to obtain construction finance and
at the same time developers can get attractive interest
rates. Importantly, given the high cost of equity, a portion of the land
should be allowed to be financed by bank debt or debt from financial
institutions like HUDCO, HDFC etc.
Land finance may be
permitted with institutional funds with prescribed qualifying criteria which
can initially be limited only to Affordable housing projects.
Steps should be taken to institutionalize India's real estate
sector through widening the funding options to achieve quicker financing for
real estate projects and give investors an alternate source of investment.
Liberalization of foreign direct investment (FDI) regulations for real estate
sector and wider access to financial markets. CREDAI advocates the easing
of norms and restrictions for FDI to attract more investments through
this route.
For the benefit of the End consumer and demand creation Mr.
Reddy recommends that the government should increase the threshold limit
to Rs. 5 lakhs for deduction on interest on housing loans under
section 24(b) of the income tax from the current limit of Rs.
1.50 lakh. This is important as the cost of property has increased
significantly and the increase in limits will encourage individuals to
invest more in the real estate sector and avail the tax sops.
He also proposes that for the first time Home buyers from 2014
onwards, the maximum deduction can be lesser of 50% of the purchase price of the
house. The deduction should be allowed as per the housing prices in
different cities like Mumbai should attract exception up to Rs.
50 lakhs, Other cities like Delhi, Bangalore, Chennai,
Hyderabad, Pune and Kolkata the slab can be fixed at
35 lakhs and for other cities Rs. 30lakhs. We propose that
the deduction should be spread over a period of 10 years for purchase of
one house. Total deduction remains capped at INR 5 lakhs for a given
year. This will promote the demand for housing in a big way.
Mr. Shekar Reddy, is positive that if the recommendations on
increasing funding options, reduction in taxes, increasing the limits for tax
rebate on home loan interest, introduction of policy measures to hasten the
approval process along with treating housing as an infrastructure sector, will
trigger a spurt in construction activity and contribute to the double digit
growth in GDP. I am sure the government will introduce these measures to
encourage the housing sector to work constructively and take a proactive role
towards achieving the mission of “Housing for All” by 2022.
For media contact
Nishanth
M: 98840 70861
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