Govt Must Address GST On New Homes Which Is Currently Inflationary

Sudhir Pai

Much on expected lines, the government in Budget 2018-19 has continued with its thrust for Affordable Housing and Housing for All scheme. The government has been consistent with its efforts in addressing affordable housing in 2017 -- be it giving infrastructure status to this segment in the previous budget, to helping increase the quantum of beneficiaries in CLSS under Pradhan Mantri Awas Yojana (PMAY) by expanding the carpet area and re-defining income definitions. Now, Budget 2018-19 has further given impetus to affordable housing by creating a dedicated fund under the National Housing Bank (NHB).

This fund will be provided for from priority sector lending and fully serviced bonds authorised by the Government of India. Now that the government has created significant enablers to increase demand and to create favourable conditions, we should hopefully see a significant spike in new launches/supply in the coming days in the affordable housing segment.

It is also encouraging to see the government address the issues of housing in urban areas. While providing assistance to construct 37 lakh houses in urban areas will take care of the urban housing woes, financial assistance (Rs.2.04 lakh crore) to 99 Smart Cities will ease the pressure on the existing urban centres.

Further, the Finance Minister also proposed that no adjustment shall be made in respect of transactions in immovable property, where the circle rate value does not exceed 5 per cent of the consideration -- this would affect only those localities where circle rates are higher than prevailing market rates. The government steered clear of further tax breaks for either industry or for the buyers.

That said, the government has been actively regulating the real estate industry over the last several quarters. From demonetisation aimed at curbing the effect of unaccounted money; to RERA which will help bring in consumer confidence, the real estate sector has seen significant regulatory influence in the past year.

While the budget is now done and dusted, there are some matters which would help drive the industry ahead more vigorously. We hope that going ahead the government will (a) address the issue of GST on new homes which is currently inflationary (b) examine the issue of lowering the cost of transactions, particularly stamp duty and registration fees (c) create enablers for the sector such as digitisation of property registries; guaranteeing or insuring land/property titles; enhancing liquidity in real estate markets through REITs and other means and (d) strengthen RERA to resolve disputes speedily and help drive confidence amongst consumers.

As we've been saying for a while now, there are green shoots emerging in the industry once again and we expect a gradual recovery in the course of 2018. With the government having done its bit, there is now need for concerted and purposeful action from developers and other stakeholders in the industry to do their bits and help the process for a better 2018 for real estate.

(Sudhir Pai is CEO of magicbricks. He can be contacted at sudhir.pai@timesgroup.com)