The Confederation of the Indian Industry has urged the government to increase the tax benefits to home buyers and extend the income limit under Pradhan Mantri Awas Yojana to boost demand in the real estate sector which is battling stress and liquidity issues for the past year.
“To meet a minimum GDP growth target of 6 to 7 percent it is very important to have a definitive plan for boosting the demand in the real estate sector, which will have significant impact on job creation in both formal and informal sector, as well as a multiplier effect on overall demand” recommended Chandrajit Banerjee, Director General of the Confederation of Indian Industry.
The announcement of Rs 25000 crore Alternate Investment Fund for providing last-mile liquidity is a very welcome step. “However, the sector needs more liquidity support and steps to boost demand,” he said.
CII has also proposed a focused action plan to boost the real estate sector as part of its pre-budget recommendations.
CII has called for additional tax benefits to home buyers to boost housing demand. The maximum available deduction on interest payment of home loan taken for all the property/(ies) should be increased from Rs 2,00,000 to Rs 5,00,000.
Furthermore, the quantum of set-off of losses from house property (self-occupied/rented) against other heads of income should be increased from INR 2,00,000 to INR 5,00,000.
The Government should consider increasing the income criteria under PMAY scheme to Rs 18 and 25 lakhs from the current Rs 12 and 18 lakhs in the MIG I & ll categories, respectively. This would allow a wider section of the society to benefit from the scheme pushing demand.
ln addition to low demand, the sector has been facing liquidity challenges, post the ILFS crisis. Granting infrastructure status to integrated townships and the overall housing sector would also help developers access priority funding at a lower cost.
Currently, eligible corporates across sectors are allowed to raise ECBs worth USD 750 million in a year, and only for construction funding. This limit should be increased to include the entire real estate sector within its ambit.
The Government should also consider extending the developer incentives to all SEZs approved by 31 March 2017, instead of to only those notified till 31 March 2017. There are many SEZ projects that were approved at the end of 2016 and in early 2017 but could not be notified prior to 1st April 2017. There is typically a lag between approval and notification because of several time-consuming clearances.