Demand boost through tax exemptions tops realty wishlist

Real estate sector was in a terrible state in 2011.With developers unwilling to bring down prices, and high interest rates dampening demand, business has not been usual for them. It has lost almost 13 percent in the last one year. Demand has, in fact, either been flat or declined over the past one year.

In such a scenario, the wishlist of the sector is mainly concerned with anything that could inch up demand for properties: be it residential or commercial. Here is a list of what the industry wishes for and how far the government is likely to relent:

1. The industry is asking for tax exemption on interest on housing loan to be raised to Rs 3 lakh from the current Rs 1 lakh. According to analysts, the government is likely to grant this wish. It would be positive for the sector as it will boost demand.

2. On the policy front, the industry also wants relaxation of end-use restrictions on the use of External Commercial Borrowings (ECBs). Rajeev Talwar, executive director, DLF, told CNBC TV 18, “ECB tied down to projects with a lock in period should come in, because funds coming in must be long term and tied to projects.” If the government allows free use of ECB funds, the biggest beneficiaries would be - DLF, Unitech and HDIL.

3. Uniform direct and indirect tax regimes across the country will also be welcomed, though this will come under the implementation of Goods and Services Tax (GST) and will take time till states agree. Meanwhile, some tax exemptions in SEZs where realty players are active will be positive for the industry. However, at a time when the government is grappling with its fiscal deficit numbers, very high tax exemptions might not be granted.

4. Passing of FDI in multi-brand retail will also boost commercial property demand. But this again, is unlikely to be a part of Budget 2012. However, the government could build better consensus and reintroduce the Bill in the Budget session.

5. There are some other wishes like granting more funds for Rajiv Awas Yojana, Indira Awas Yojana and Rural Housing Fund. The industry also wants the 1 percent interest rate subsidy provided last year to be widened to include wider price bands.