Realtors want govt to continue with reforms

Devesh Chandra Srivastava

FEB14,2010

Real estate players have called upon the government to continue with its reform agenda in Budget 2010. Cash-starved realtors are also looking for more sops to be able to roll out new affordable housing projects and integrated townships. Developers under the aegis of the Confederation of Real Estate Developers Association of India (CREDAI) have already met finance minister Pranab Mukherjee and put forward their demands. Pradeep Jain, chairman of Parsvnath Ltd, and president of CREDAI- NCR, said, "In order to support developers' efforts to promote LIG/ MIG housing projects, there is an immediate need for a tax holiday under section 80- IB (10)." Realtors also feel that easing the burden on buyers' pockets will help increase the sales in the upcoming affordable projects. As Rajeev Talwar, group executive director, DLF Ltd, said, "My demand would be to empower the buyers through more sops on housing loans. Lowering of home loan rates could be one of the measures. The government should continue the reforms." Apart from LIG/MIG housing projects, developers have been demanding tax holiday for industrial parks under Section 80-IA (4) (iii). Growth in the commercial space during 2007 and 2008 was primarily driven by IT and ITeS sectors. But because of the slump over the past two years, IT spending, particularly in the banking, financial services and insurance (BFSI) sector has been hit. This resulted in reduced offtake of space and increased vacancy. The tax holiday would give the much- needed support to the commercial sector. Some others believe that funding options for the real estate sector should be opened to beyond institutional investors. Anuj Puri, chairman and country head, Jones Lang LaSalle-Meghraj, said, "With the investment climate once again turning favourable in India, the Budget will also have to address the long-pending issue of real estate mutual funds (REMFs). Also we'll welcome a budget that finally and decisively enables the entry of foreign direct investments ( FDIs) into the real estate sector." According to the existing rules, FDI in real estate sector has a three- year lock- in period. Recently, the finance ministry rejected a proposal by the department of industrial policy and promotion (DIPP) to drop the three- year lock- in. Responding to a draft Cabinet note circulated by DIPP in November, 2009, the ministry said the lock- in acted as a deterrent, checking speculation and shielding the sector from sudden flight of capital during times of crises, such as the global meltdown in 2008 when foreign institutional investors pulled out $ 5 billion from equity investments between September and October. REMFs could prove beneficial for the commercial real estate sector. Indirect property owners, who own small shares of buildings through structured investment products or real estate investment trusts (REITs) can be direct beneficiaries. Abhishek Lodha, MD, Lodha Developers Ltd, said, "We look forward to flexibility in FDI norms as well as forward momentum for REMFs/REITs as good alternatives to address the issue of capital funding requirements for high- end projects."