Realty body asks for easing of ECB norms

The real estate sector, which is expecting a revival due to the current upturn in the economy, has made a pitch for easing of external commercial borrowing (ECB) norms in order to avail of cheaper funds. Besides, it has sought tax holiday for industrial parks, tax concessions for affordable housing projects and infrastructure status to various townships.

A large number of builders and developers representing the Confederation of Real Estate Developers’ Association (Credai) will put up its demands at a meeting with the finance ministry, slated for January 7. Credai wants special incentives for the implementation of slum rehabilitation projects and redevelopment of dilapidated buildings.

Credai official Ranjit Naiknvare told Business Standard: “ECB is necessary for a large number of real estate developers as they are currently not able to source cheaper funds in the country. We will suggest that developers constructing flats below 1,500 sq ft be allowed to go in for ECB. Even though flat owners are able to get housing loan at 8-9 per cent, the construction finance for a limited number of developers is available at 14-15 per cent from banks and financial institutions. In the absence of finance, a large number of developers are forced to tap funds from private financiers.”

Moreover, the realty sector is in favour of removal of anomalies in the Income Tax rules. Naiknavare said, under Section 56 (2), a flat owner, was entitled for increased tax according to the new ready reckoner rate at the time of taking possession of a flat. “It is absurd as the construction takes at least two to three years.”

In case of recovery of service tax, Naiknavare said there was a confusion over the residential flats covered. Ironically, various states were serving notices for the recovery of service tax and it should be stopped. As far as recovery of service tax on commercial complexes were concerned, the rates were quite high and they should be rationalised.