While the Finance Minister allotted Rs. 4,000 crore for affordable housing for the urban poor during the Union Budget last year, no major mandate has been laid towards land acquisition bills, or reduction in stamp duty on property transactions. To further improve on fiscal deficits and bolster economic growth, the Union Budget 2015 should encompass the following:
Grant industry status to real estate sector
Finance, insurance, real estate and business services sector has been the prime driver of India’s GDP growth and today, the term ‘real estate sector’ is not merely restricted to development of residential, retail or commercial property. It has expanded its domain to include industrial growth, development of economic hubs and formation of integrated townships. The segment provides infrastructure requirement like building and community space for various economic activities and should be granted the much required “industry” status.
Tax concession for SEZs
Currently, the SEZ policy in India has lost its relevance due to the introduction of Minimum Alternate Tax (MAT) on companies and Dividend Distribution Tax (DDT) on developers. Tax concessions to Special Economic Zones require a revisit in view of the Government’s “Make in India” initiative. Other than tax incentives, the government should also focus on developing the necessary infrastructure for promoting manufacturing such as airports, ports, freight corridors, logistics and warehousing to revive investor interest in SEZs.
Removal of the consent clause from the Land Acquisition Act
The main change proposed in the Land Acquisition Act by the ordinance passed in December 2014 includes removal of the mandatory 80% consent clause for land acquisition for five priority sectors — industrial corridors, public-private partnership projects, rural infrastructure, affordable housing and defence. Other than this, 13 existing legislations have been proposed to be brought within the purview of Land Acquisition Act where there was no uniform central policy of rehabilitation and resettlement. All these changes will result in ease in land acquisition for large-scale projects especially in priority sectors like affordable housing, defence and infrastructure.
In terms of compensational benefits, no change has been proposed to the Land Acquisition Act (2013) and so it will not negatively impact the farmers. Unlike 1894, the 2013 ordinance actually assures farmers four times the market price for rural plots and two times for urban areas in case of land acquisition. Large-scale projects proposed by the new government in infrastructure, affordable housing, and defence require expansive land parcels; hence growth & development should be encouraged.
Reduction in home loan rate
Inflation in the Indian economy has reduced substantially over the last six months with Whole Sale Price Index for January 2015 recorded at -0.39%. With the economic growth reviving and banks lowering their savings rate, reduction in home loan interest rate will provide necessary momentum to the real estate sector. Although housing requirement remains high, most property buyers are challenged by high price points reducing their capacity to finance their loan obligations. Reduction in home loan interest rates will bolster the common man’s financial confidence and thus reflect positively on the annual unit absorption figures.
Shrinivas Rao, industry expert & CEO-Asia Pacific, Vestian