Tuesday, June 30, 2009

Slowdown-hit real estate bets big on Budget

Having been hit the hardest by the economic downturn, embattled realty majors are betting big on the forthcoming Budget, to be presented on July 6, in a bid to revive the sector’s fortunes. Experts say the sector needs government support as well as further stimulus to get out of the current slump.

While the government with a clear mandate has provided the requisite stability to the economy, it now needs to focus on retrieving the sluggish real estate which is now facing a severe financial crunch. This is important in view of the fact that real estate in India is the second largest employer next only to agriculture, and growth in the sector has a direct impact on ancillary industries such as steel and cement.

“In the backdrop of its importance to the growth of the Indian economy, it is vital for the government to nudge growth in the sector, through fiscal stimulus, to newer heights which would also help make affordable housing a reality and within the reach of the proverbial ‘aam aadmi’,” says Nandita Tripathi, associate director, KPMG.

As a first step, the government should accord ‘infrastructure status’ to the housing sector and appoint a regulator to act as a single window for overseeing and monitoring the affordable housing agenda. “After being hit by the global financial meltdown, real estate developers have now recognized the growing demand for affordable housing. To provide further impetus to this direction of development, the government should consider reinstatement of the tax holiday benefits under Section 80IB-(10) for affordable housing projects,” says Tripathi.

Brotin Banerjee, MD & CEO, Tata Housing, is also of the same view. “We seriously believe that the housing sector should be delinked from real estate and be accorded infrastructure status. This will enable easier access to low-cost institutional funds as also allow the sector to tap long-term funds,” he says.

Further, for affordable and low-cost housing, “we at TATA Housing believe that loans for such projects should be made available at lower rates and also qualify for stamp duty and fee waiver. Development and approval charges should similarly be done away with or at least subsidized,” says Banerjee.

Moreover, increase in the limit of interest on housing loan from the existing Rs 1.5 lakh to Rs 3 lakh and a corresponding increase in the tax deduction limit for the principal loan amount would also go a long way to enhance the common man’s appetite for home loans by lowering their tax outflows and, hence, making their dream home a reality. Besides, “tax benefit should be given from the year the loan is taken from banks, rather than after taking the possession of the house. This will help in providing stimulus to new launches,” suggests Neeraj Bansal, associate director - advisory services, KPMG.

In the current economic slowdown, real estate mutual funds (REMFs) could provide the necessary financial support to the cash-starved housing sector. However, since their introduction a year back, REMFs have not found any takers due to unclear regulations and absence of guidelines for their tax treatment. “Recognizing the need for REMFs as an important capital contributor for the sector, the government should consider aligning the regulations to global best practices, including providing a tax pass through status for registered REMFs,” says Tripathi.

'Property brokers expect prices to increase assetventures'

'Property brokers expect prices to increase'

Residential property builders have something to cheer if the result of a poll of property brokers conducted by Edelweiss Capital is any indication. The pan-India poll shows that property brokers expect prices of residential property, especially i n the Mumbai and NCR region, to increase around the Budget, Edelweiss said in a press release issued here.

"Throughout India, property brokers have turned positive on the Indian residential realty market, in the last three months," the poll said. There has already been an increase in the number of transactions in the past one month against nil in the preceding five months, it said.

The poll was conducted amongst 100 odd property brokers in the first-half of June in the four cities of Mumbai, NCR, Bengaluru and Chennai and 20 micro-markets. A significant change in sentiment post-elections and preceded by strong stimulus measures have contributed to a strong recovery in volumes and prices, the release said.

According to the poll, nearly 87 per cent of the brokers surveyed endorsed that transactions had indeed increased in the last one month.

Huge rush to avail property tax rebate

NEW DELHI: With the deadline for filing property tax returns (PTR) only a day away, property owners eager to avail the early payment rebate of

15% queued up from 9am at various MCD tax collection centres in the city. Despite the option of filing returns online, many still opted to submit the PTR forms manually. Some said they found the online procedure slow.

At the Lajpat Nagar centre, the queue was particularly long. Said Kavita Sharma, a resident of Sarita Vihar, " I don't have much faith on online transactions. We get a receipt immediately this way.''

Another taxpayer, K P Singh, added,"The online servers are not working properly and filing online is more expensive since we have to pay an additional Rs 50. I'm paying my taxes now because I did not find the time earlier.'' Some also said that despite filing their returns last year, the payment hadn't been updated online and still showed as arrears."I filed my returns by going to the centre. But this year, when I tried to pay it online, it showed as arrears. Why should I pay the tax twice?'' asked a tax payer who did not want to be named.

However, MCD officials said arrears were showing only in those cases where the cheques had not been realised before the due date or there had been a refund. The officials admitted that the online system may have been slow over the last three days because of the massive rush of people who waited till the last day to file returns.

"For the last three days the online system is slow because it's being hit 3500 times per minute, peak time being 10am to 4pm,'' said a senior official.

Meanwhile, MCD made provisions for property tax collection at all its 12 zonal offices and the headquarter in Lajpat Nagar. The centres will be open from 9am to 9pm on Tuesday to help tax payers get their 15% rebate on the last day. And taxpayers can pay online till midnight for the same rebate.

MCD's director press information, Deep Mathur said, "In order to facilitate property owners and tax payers we have kept all our property tax collection centres open from from 9am to 9pm on Tuesday so that they can avail the 15% rebate even on the last day.''