Demonetization in 2016 had a major impact on the Real Estate and now in 2020 COVID-19 is posing as a bigger threat of slowdown in this sector. The Real Estate Sector being the third largest employer in India after agriculture and manufacturing, provides employment to over 50 million people in the country. Apart from employment, the real estate sector directly/indirectly contributes maximum % to India’s GDP therefore it is imperative to ensure revival of the sector from impact of COVID-19 and maintain its momentum.
It is high time for the Govt to lay the groundwork to deal with the slowdown, keeping in mind the working of industry in long run.The Govt should be focused and aggressive towards this sector and should realign the functioning of its departments to boost confidence and maintain liquidity in the market. In my opinion, the Government should consider taking the following actions to boost the Real Estate Sector:
- Time extension of 9 to 12 months for all sanction plans / all approvals (like Airport Authority NOC, Environment clearance, Fire fighting etc.), Extension of construction period and RERA possession timelines without any penalty across India be granted.
- Registry/Registration amount should be fixed at standard 5%across the country for next 1 year. Registry should be done at 33% of the cost (effectively a rebate of 66%) so that people are encouraged to go in for registry of property. It will lead to transaction flow and subsequently lead to increase in Government revenue.
- Transactions to be allowed at 40% less than the circle rate (prevailing being 10% of circle rate in last budget) for the next 2 years as buyers expecting rates to be down further and reducing circle rates limit will help buyer/seller to do transaction fast. It will increase the volume of transactions and lead to money flow in the market.
- GST on all lands /Govt charges like Lease Rent or Joint Development or Development model should be fixed at 2% across the country to boost the volume of transactions.
- Govt dues against land / lease rent/ development charges should be deferred for a period of 1 year with no penal interest applicable for the said period. In practicality, full waiver of penal interest is a bleak possibility, but can be looked at 50% waiver to make win-win situation for both builder and government. This would ensure the builder is only bearing and incurring the cost of construction and the operations
- Banks should give moratorium period for minimum 1 year and at the same time should consider reducing rate of interest to the builder against loans disburse din past for construction. With the support of the Government,SBI and other banks should come forward and takeover the old loans disbursed to builders (against viable projects) by NBFCs at very high rate of interest (Few NBFCs have charged 16% to 21% from builder on project loan).
- Short Term loans for tenure of 2/3 years should be made available at less than 10%,against pending inventories (Ready to Move or Under Construction) .This will help builder with liquidity issues.
- Short Term as well as Long Term Capital Gain on property should be 10% for the next 2 years and it should also be applicable for commercial property or any type of property transactions.
- Home loan interest tax benefits should be raised to 5 Lakhs from 1.5 lakhs, as now mid segment flat costs above 50 lakhs which implies that customer pays around 4 to 5 Lakh as interest in a year. If possible, in case of a first time buyer, the complete interest borne by the buyer in a year to be given as tax benefit.
- Govt should roll out schemes similar to “vivad se vishwas scheme” for both GST/ Income Tax for all pending and due taxes (GST, Income tax or any other) till 30th June 2020. With the principal amount being payable in the next 2 years and interest/penalty should be considered for a waived off. Scheme can be designed in such a way that no interest is payable on whatever principal amount is paid in the first year and for the principal amount paid in the subsequent year a penalty of 10% is applicable.It will encourage people with money flow to pay and maintain liquidity at the same time.
- For all the new projects, Authority which is allotting land, should give a single window for all approval from other departments (Like airport authority / fire fighting/ environment etc.)
These steps if implemented would not only boost the confidence but would also expedite completion of projects in timely manner and will ensure liquidity in the market and revenue generation for Government in the long run. This is the time we all need to be together/ need to be aggressive / need to act smartly and keeping in mind longer term gain for everyone so that the Real Estate Sector emerges from the crisis and reinvents itself.
Mr. Pawan Jasuja