Budget 2019 wishlist: Here are the key challenges for real estate sector

Last 12 to 24 months have been a mixed bag for the real estate (RE) sector as a whole.  While there has been an upsurge in activities in asset classes such as commercial, warehousing and retail, the residential market has largely seen a flattish trend with a few bumps coming from the affordable housing space.  Start-ups are lining up in the RE sector with co- living business models and the sector also witnessed its maiden REIT listing.  

KEY CHALLENGES

• Impact of GST on (i) construction costs, especially for Built to Lease assets where subsequent credit is not available,  (ii) Premium charges and (iii) Land related arrangements between developers and landowners 
• Residential projects stuck mid-way due to financial stress, with home buyers having limited options to resort to.  
• Affordability of homes in urban areas after considering the additional transaction costs.
• Lack of long-term cheap finance for large projects.

INDUSTRY ASK

• Re-introduction of SEZ tax holiday for developers and extension of tax holiday for units. 
• Distressed projects - one time incentive to developers taking over existing projects which are under financial / operational distress. 
• Affordable housing - extension of tax holiday. 
• Credit for GST incurred on construction cost for Built to Lease assets.  
• Introduction of tax incentives for co-living ventures
• A road map to developing Rental Housing sector under partnership with Government 
• Exemption from paying Dividend Distribution tax in case of a Holding Co structure under REIT

PwC POINT OF VIEW

“Budget 2019 is a great opportunity to create policy framework for emerging asset classes (such as Rental Housing & Co-Living) which is attracting attention of global investors.  It is perhaps the right time to have a more inclusive approach to the “Housing for All” initiative.”

Bhairav Dalal, Partner and Leader Real Estate Tax, PwC India

INDUSTRY VOICE

“There are three main asks from the Budget. First , please INDEX for inflation the measures that were implemented by the government between 2000 and 2004 for the housing & real estate sector. It is the easiest way to stimulate demand , construction, employment and revenues . Second , introduce input tax credit in GST for real estate. Third, introduce a national rental policy with adequate incentives for investment in homes. That will give a huge spur to affordable and other housing.”

Rajeev Talwar, Chairman NAREDCO and CEO DLF