India’s real estate sector, once a vibrant engine of the nation’s economic juggernaut, has in recent years grappled with significant challenges. Stalled projects, liquidity constraints, and a complex regulatory landscape have dampened investor confidence and impeded market growth. However, hope for revival flickers brightly in the pre-budget recommendations submitted by the National Real Estate Development Council (NAREDCO), the apex body representing developers across the country. In a meticulously crafted document, NAREDCO presents a compelling case for policy interventions aimed at rejuvenating the sector and unlocking its vast potential.
Rekindling the Fire: Reinvigorating SWAMIH with a Second Tranche:
The SWAMIH (Special Window for Affordable and Mid-Income Housing) Investment Fund, established in 2017, stands as a testament to the government’s commitment to revitalizing stalled housing projects. Its first tranche, with a corpus of Rs 25,000 crore, has demonstrably yielded positive results, facilitating the resolution of non-performing assets (NPAs) worth Rs 1 lakh crore and benefitting over 2 lakh homebuyers. Recognizing this success, NAREDCO has urged the Finance Minister to allocate a substantial Rs 50,000 crore for a second SWAMIH tranche in the upcoming budget. This audacious move would not only inject much-needed liquidity into the system but also provide a crucial lifeline to beleaguered projects, ultimately restoring homebuyers’ faith and confidence.
Empowering MSMEs: Granting Real Estate Projects Deserved Recognition:
Real estate projects, by their very nature, involve substantial capital investments and operational complexities. Yet, they are currently categorized as large-scale enterprises, limiting their access to the numerous benefits accorded to micro, small, and medium enterprises (MSMEs). To address this disparity and promote the growth of smaller developers, NAREDCO proposes granting MSME status to eligible real estate projects. This move would unlock a plethora of advantages, including access to priority sector lending with lower interest rates, simplified regulatory compliances, and tax benefits, thereby enhancing project viability and facilitating faster completion. Careful considerations of turnover thresholds and other eligibility criteria would ensure the targeted application of this measure, preventing potential misuse.
Taxing Times: Eradicating the Burden of Unsold Flats:
The lingering ghost of unsold flats continues to haunt the real estate landscape. As per industry estimates, over 7 lakh units remain unsold across the country, posing a significant financial burden on developers. This burden is further compounded by the provisions of Section 23(5) of the Income-tax Act, which deems the notional rent of unsold properties after two years as taxable income. Recognizing the devastating impact of this provision, particularly in the wake of the COVID-19 pandemic and subsequent economic disruptions, NAREDCO has championed the cause of exempting unsold flats from income tax. Such a measure would alleviate the immediate financial pressures faced by developers, incentivize project completion, and ultimately enhance market liquidity.
Building a Brighter Future: Input Tax Credit and Rental Housing Incentives:
The dream of “Housing for All” remains an unfulfilled promise in India. To bridge this gap and make affordable housing a reality, NAREDCO has advocated for the extension of input tax credit (ITC) benefits under the Goods and Services Tax (GST) regime to residential projects falling under higher tax brackets. This would effectively reduce construction costs, thereby lowering the final price of homes and fostering greater affordability. Furthermore, encouraging the development of rental housing through dedicated incentives could address the housing needs of a burgeoning young population and migrant workforce, offering them greater flexibility and mobility.
A Blueprint for Progress: Moving Forward with Vision:
NAREDCO’s pre-budget recommendations serve as a comprehensive roadmap for revitalizing India’s real estate sector. The proposed interventions, meticulously crafted with legal precision and underpinned by sound economic rationale, address the sector’s core challenges while promoting sustainable growth. By embracing these proposals, the government can take crucial steps towards unlocking the sector’s vast potential, boosting economic activity, and ultimately fulfilling the aspirations of millions of Indians yearning for a safe and secure roof over their heads. The coming year’s budget will be a litmus test of the government’s commitment to the sector’s revival. Embracing the spirit of NAREDCO’s recommendations and implementing them with thoughtful deliberation could mark a turning point in the narrative of India’s real estate sector, ushering in an era of renewed hope and sustained prosperity.
Aditya Pratap is a lawyer and founder of Aditya Pratap Law Offices. He practices in the realm of real estate, corporate, and criminal law. His website is adityapratap.in and his media interviews can be accessed at http://www.youtube.com/@AdityaPratap/featured. Views expressed are personal.
This article has been assisted by Aruj Gupta, a 3rd year law student pursuing B.A., LL.B. from NMIMS Bangalore.