Realty sector seeks infra status, tax rationalisation in upcoming Budget

Although the current dispensation has taken many hard decisions to bring transparency in the real estate sector, there are still many policy-related pain points which the coming Union Budget may try to assuage.
 
Even as the sector, where cash transaction was prevalent widely, is coping the government's decision such as demonetisation and the implementation of Real Estate (Regulation and Development) Act, 2016 (RERA), it hopes that in the last full Budget ahead of 2019 general elections Finance Minister Arun Jaitley might come up with some measures to give some fillip to the sector.  
 
This benevolence needs to go beyond improving personal finances and the implied boost to real estate investment appetite.
 
Anuj Puri, Chairman of ANAROCK Property Consultants, suggests some measures for the sector in the coming Budget:
 
 Single-window clearance
 
The clearance and approval process for the residential real estate projects has been an impediment for a long time. Although many initiatives have been taken to create a conducive business environment in the sector, the demand for single-window clearance mechanism is yet to be fulfilled.
 
If implemented, single-window clearance can significantly reduce the overall projects cycle time and developers will be able to focus on their core business of project execution. Post-RERA, it has become more important to facilitate smooth clearances and approvals so that there are no execution delays due to procedural hindrances.
 
Infrastructure status to real estate sector
 
Granting infrastructure status to the sector is a long-standing demand. Real estate is one of the key GDP contributors and the fourth-largest employment generator in India. Extending infra status to the sector will help developers raise funds at lower rates and, in turn, reduce their project costs.
 
Tax rationalisation on REITs
 
As of today, the first REIT is yet to be listed in India. Simplifying the taxation norms for REITs is a critical requirement for listings to start flowing in, which will benefit the entire real estate sector by the enhanced participation of a much broader bandwidth of investors.
 
 Higher income tax benefits for the first time home buyers
 
This has always been a matter for the residential real estate sector. Currently, a first-time homebuyer can claim an additional tax deduction of up to Rs 50,000 per financial year under Section 80 EE of the Income Tax Act, provided certain conditions are fulfilled. Tax exemption should be increased so as to incentivise first-time home buyers.
 
Reduction in GST rates
 
As of now, under-construction properties are levied a GST of 12%, which is significantly higher than the previous taxes. The government should strive to make GST a tax-neutral proposition so as to help reviving demand in the sector. Clarity and transparency on input tax credit will also help in rationalising the taxes.
 
Higher incentives for green buildings

Marginally higher cost of construction of green buildings has kept a majority of developers away from such projects. Keeping the current and certain future challenges to the environment, the government should encourage developers with higher incentives in terms of FSI and/or some degree of tax exemption to encourage them to adopt green building technologies.