As Finance Minister P Chidambaram begins his pre-budget consultations, Commerce and Industry Minister Kamal Nath on Monday said the government has to look at demands of the construction industry for a cut in duties and taxes on building material.
"I favour what stimulates a sector where there is a huge demand... and any sector where this stimulation is needed, the government has to look at it," Nath told reporters on the sidelines of a real estate conference.
According to estimates by the Confederation of Real Estate Developers Association of India, of the average housing cost of Rs 2,700 per square ft in the country, Rs 700 is accounted for by a host of taxes and duties. "We have calculated when a sale takes place at such a price, the total that is collected by way of direct and indirect taxes, duties, levies, octroi and service taxes amounts to more than 25% of the price. This is a matter of concern," CREDAI Chairman Kumar Gera said.
Government allows 100% foreign direct investment in the construction sector and the policy permits setting up of wholly owned subsidiary, Nath said. He added that it is a good sign that state governments joined hands with private entrepreneurs to resolve the acute housing problem in urban areas. However, it is "important to address institutional and regulatory aspects as well as strengthen and expand the capacity of financing institutions for further growth of the sector," Nath said.
Gera also mooted the idea of setting up special residential zones (SRZs), on the lines of special economic zones, for large scale affordable housing. He said such zones, comprising 5,000 units of 60-80 sq mt each, could be run and managed like SEZs with a development commissioner and a board of approval looking into the setting up the zones across the country.
Noting that there is a need for such low-cost housing in the country, Nath commented that such zones would come under the ambit of the Urban Development Ministry and not his department.
Speaking on the occasion, Minister of State (Independent Charges) for Housing and Poverty Alleviation Kumari Selja said the government has no intention as of now to bring in a real estate regulator on pan-India basis. "Regarding a (real estate) regulator on all-India basis, we do not have any proposal right now to bring in and implement it unless at least 2-3 states ask for it," Selja said.
She also said that it was up to the states to come forward with the demand for a regulator and the centre would consider it accordingly. On the proposed realty regulator for Delhi, she said it is under the ambit of the Urban Development Ministry and is expected to come soon.