Tag Archives: Confederation of Real Estate Developers

Affordable Housing Policy for All

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In two months, India could have a brand new affordable housing policy, an effort to give some boost to a weakening real estate sector. The Union Ministry of Housing and Urban Poverty Alleviation (Mhupa) is in the process of finalising such a policy in two months.  The government had already allowed external commercial borrowing  for low cost houses in India in the annual Budget. But the real estate companies are not too keen on this segment because of the low margins. Hence the government is now trying to make affordable housing attractive for the developers as well.

The policy will raise the floor space index to compensate developers for high cost of land and also ease density norms, the Business Standard article says. It would give capital and interest subsidy to developers. Even government land would be auctioned on the basis of who could build maximum number of low cost houses.

Approvals would be given in six-eight weeks as against almost 70 approvals they require at present which typically take   between two to three years.

A recent example of such a case is the allegation by the Maharashtra Chamber of Housing Industry and the Confederation of Real Estate Developers’ Associations of India that plan to construct 500,000 affordable homes in Mumbai, Thane and Raigad districts of Maharashtra is gathering dust due to “inaction and policy paralysis” on the part of the state government. Such projects could be better executed with some sort of a single window clearance system.

On the other hand, the government is also making strict riders for the ECB borrowing so that money cannot be borrowed for low cost housing and transferred to other segments.  So the government could mention specific projects and developers that could access the ECB funds and also mention specific channels like National Housing Bank to borrow the funds.

NRI Market is less volatile.

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For most top property developers in India, the Non-Resident Indian (NRI) is a crucial part of their business.

They know that the NRI will always want a piece of his/her homeland, no matter the price and no matter the time.

Thus, despite the price rise of 43 per cent to as much as 166 per cent in various cities, the NRI cash is still flowing into the Indian property market.

Developers say sales in that segment are not as variable as the domestic Indian market.

Noida-based property developer Amrapali Group’s chairman and managing Anil Kumar Sharma told tabla!

“NRIs wish to have a second home in the country they belong to. Favourable government policies are also a driving force behind the increased interest of NRIs in investing in Indian real estate. NRI investments are the least volatile of all in our industry. They are assured that they are investing in an asset which they can fall back upon.”

Mr Sharma, who is also the vice-president of the Confederation of Real Estate Developers’ Associations of India, added that prices are rising because of the expanding infrastructure, which in the long run will help the buyer and increase the value of the property even further.

He said: “Upcoming projects like the metro, monorail and the international projects in the big cities in India have contributed to the inflated real estate prices in these cities.”

Amrapali claims that almost 35 per cent of its overseas business comes from Singapore.

No wonder it will be participating in Sumansa Exhibitions’ Indian Property Show to be held in Suntec City on April 14 and 15.

Budget 2012: 1 per cent TDS imposed on property sales.

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The government has proposed one per cent TDS (tax deduction at source) on transfer of immovable property if the sale value exceeds Rs 50 lakh in urban centres and Rs 20 lakh in other areas.

Finance Minister Pranab Mukherjee said in his Budget speech that the measure is proposed in the Budget and is being taken to “deter the generation and use of unaccounted money.” Immovable properties, other than agricultural land would be covered under the new provision.

The application of TDS would be effective from October 1 this year. It has been provided that transfer of property would not be registered unless the buyer furnishes proof of deduction and payment of TDS.

At present, tax is required to be deducted at source by the transferee on transfer of immovable property by a non- resident. But, there is no such requirement on transfer of such property by a resident except in few cases, it added.

Reacting to the proposal, the apex realty body CREDAI said that this would lead to increase in property prices.

“It looks like that the proposal of TDS would apply on transactions in the secondary market and not on sale of builder’s flat,” Confederation of Real Estate Developers’ Association of India (CREDAI) Chairman Pradeep Jain said.

The new proposal intends to collect tax at the earliest point of time and have a reporting mechanism of transactions in the realty sector.

The provision would apply if the consideration exceeds Rs 50 lakh if property is situated in “specified urban agglomeration” and Rs 20 lakh if property is situated in any other area.

Union Budget 2012-13: Buying or building of a house will cost more.

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Realty players said that purchase or construction of a house would now cost more due to expected rise in prices of key raw materials cement and steel and a hike in service tax by 2 per cent.Barring low-cost housing, property prices are expected to rise in the coming days after the proposed hike in service tax from 10 per cent to 12 per cent.

TDS at the rate of 1 per cent on transfer of immovable property (other than agricultural land) above a specified threshold will also add to the cost of buying a house. The threshold would be over Rs 50 lakh an urban areas and Rs 20 lakh elsewhere, according to the budget proposals.

Cement and steel manufacturers have already hinted at a price hike after the Budget proposed raising the excise duty to 12 per cent.

Commenting on the budget proposals, Confederation of Real Estate Developers’ Association of India (CREDAI) Chairman Pradeep Jain said, “Application of TDS on the purchase and sale of property and increasing Service Tax by 2 per cent will further add on to the overall cost of property and are bound to make property more costly in coming days.”

Realty consultant DTZ said that increase in the service tax is going to further increase marginally the overall burden on the home buyers of mid and high segment (dwellings costing more than 25 lakh). The impact of service tax would be about Rs 40,000 on a Rs 75 lakh home.

However, DTZ said that affordable housing, being part of negative list, is exempted from service tax and the move would give a boost to the affordable housing segment.

Jones Lang LaSalle India Chairman and Country Head Anuj Puri said that “the increase in the service tax rate from 10 per cent to 12 per cent will increase the cost of production for developers, who are already reeling under high input costs. It follows that this increased burden will be passed on to end users”.

Builders say that Pranab Mukherjee has ignored ground realty in the Union Budget 2012-13.

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With predicting an escalation in property prices, top players in the realty sector said they had been ignored by the finance minister.

Chief of the Confederation of Real Estate Developers’ Association of India (CREDAI), Lalit Kumar Jain, said the announcement on external commercial borrowings (ECB) for affordable housing was a minor respite but still meaningless. Jain, who is also chairman and managing director of Kumar Urban Development Ltd, added, “We contribute 6.5% to the GDP and expected a big boost from the budget for affordable housing through special schemes, an interest subvention of 5-7 % for LIG (low income group) and EWS (economically weaker section) housing and promotion of rental housing through tax exemption.”

Jain also pointed out that the interest subsidy on home loans was too low. The Budget has extended the scheme of interest subvention of 1% on housing loan up to Rs 15 lakh where the cost of the house does not exceed Rs 25 lakh for another year.

In addition, Gaurav Gupta, director, Omkar Realtors & Developers, lamented that the realty sector had got nothing to boost market and customer sentiments. “There are no indications of this sector being granted the status of an industry, which it much deserves. On the contrary, the increase in service tax will push up realty prices as the additional cost will be passed on to the buyers.”

Tata Housing MD and CEO Brotin Banerjee added, “Initiatives to make affordable housing available to a larger section of the society have only been met partially.”

There were some who welcomed the proposals. Sachin Sandhir, MD, RICS South Asia felt it “exceeded expectations” given the pressures on the fiscal situation.

Realtors ask for Better home loans and tax cuts.

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Realtors from Chennai are expecting the Union government to enhance the income tax exemption for up to Rs 3 lakh paid as interest on housing loans in a year from the existing Rs 1.5 lakh which will help to boost the real estate market.

Siva Krishnan, head of residential services (Chennai), Jones Lang LaSalle India, said that  “The market, which was struggling last financial year, has picked up and we expect the government to enhance the income tax exemption limit.”

The Confederation of Real Estate Developers’ Associations of India have expressed that the realty sector and housing policy should be modified in order to address a huge demand of 26 million homes. “Inordinate delay in the sanction of approvals have hit hard. Provision of single-window clearance for real estate development projects is the need of the hour,” said CREDAI president T Chitty Babu.

In addition he also said that “Some of the measures like creation of Special Residential Zones can help. Affordable housing sector should continue to grow based on the incentive given for borrowings from banks for homes.”

Also the 36-month holding period should be reduced to 12 months.