Budget 2020: Bold fiscal measures, strong implementations will provide much-needed fillip to sagging real estate sector

With the Budget announcement less than a week away, India’s real estate and housing sector is looking forward to affirmative resolutions. The construction and real estate industry have already been witness to major developments such as the introduction of technology to improve processes, etc. However, there is also a need for it to come out of the current slump and move towards sustainable growth. Perhaps the Budget this year will provide the much-needed answers. Recent estimates indicate that some of the pain points of the real estate sector include delayed projects, shortage of funds, high unsold inventory and stalled projects. The net worth of such projects across the top 7 Indian cities is about Rs 4.5 trillion ($65 billion). The need of the hour is to turn this situation around through conducive policies. [caption id=“attachment_2608692” align=“alignleft” width=“380”]  Representative image. Reuters[/caption] There is a need to replace existing developers, enhance capital reach, and build capabilities. The government must look at reviving and completing projects that are stuck for the next four years, for instance. It also makes sense to provide home buyers relief for the units under construction for the next two to three years. To ensure there are cash flows for developers, the stress fund is a big boost but there is also a need to involve banks and NBFCs for the remaining inflow. Established corporate players in the domain must be encouraged to take up residential projects which can then be managed on a leasing basis. The government must also look at providing tax incentives for such projects given the current economic model. If the rent is allowed as a salary deduction, it will provide further fillip to corporate residential real estate projects. Another consideration should be an input tax credit benefit in GST for homes that are under construction. Although the GST rate on such properties was brought down to 5 percent in the Budget announced in 2019, the input tax credit benefit was done away with. Given that developers are cash-starved and cannot avail tax benefits for raw materials, this cost increase is passed on to buyers. By providing the input tax credit benefit, it will become possible to reduce property prices and attract more buyers towards under-construction homes. There is a need to back the investment in real estate and infrastructure with other policies for positive development in this sector. It is time that the industry undergoes an overhaul. The growth of the Indian real estate and urban infrastructure will propel the economy further as well. Giving this sector a fiscal stimulus will have a ripple effect on other allied industries. This will further enhance GDP growth and create employment as well. For the government to be able to achieve its ambitious target of a $5 trillion economy, bold fiscal measures and strong implementations are definitely the need of the hour. (The writer is Co-Founder, Housejoy-home services startup) Follow full coverage of Union Budget 2020-21 here