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'Bestow Infrastructure status to mass housing, townships'

By Anshuman Magazine
March 14, 2012 18:25 IST
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HousingTo stimulate growth in the real estate sector, the two key steps need to be taken:

  • Liquidity needs to be improved for development to increase supply
  • Purchasing power needs to improve for economic activity which in turn will create demand
For increasing supply, long-term capital is required at a lower cost for which the following can be done:

  • Infrastructure status be given to projects such as mass housing, SEZ's, industrial parks and townships.
  • Banks and NBFC's should be allowed External commercial borrowing to avail low cost capital in order to lend it further to real estate development companies.
  • Relax FDI norms in real estate to include projects smaller than the current limit of 50,000 sq.mt. and for completed projects instead of only development projects.
  • Take steps to reduce inflation and fiscal deficit which should bring down  interest rates
  • Introduce Real Estate Investment Fund in the market, which will help mobilize funds to be invested in the real estate market.
To improve demand, a number of initiatives should be considered to increase purchasing power:

Increasing the tax exemption limit on home loan interest to Rs 300,000 from the current 150,000.

This exemption should be higher for first time buyers

Interest subvention of 1 per cent on housing loans has been extended.

We propose that the limit of the same should be increased for loans up to Rs. 25 lakh from 15 lakhs where the cost of the property does not exceed INR 35 lakh (from 25 lakhs).

I
also propose that this scheme should be extended to include existing home loans as well.

While the creation of a Mortgage Risk Guarantee Fund under Rajiv Awas Yojana is a step in the right direction, the limit on home loans currently at 5 lakhs should be increased to 10 lakhs and this scheme should be implemented at the earliest.

JNNURM scheme is an excellent scheme of the govt. and should continue to receive large allocation of funds

Tax breaks for Industrial parks under Section 80IA should be extended till 2015 and should also include logistics and warehousing sectors.

Service tax on construction and rental income at 10.3% should not be increased further

The real estate prices in India are extremely high and especially housing in urban areas has gone beyond the reach of the common man.

The only solution to bring prices at affordable levels is by increasing the supply of real estate.

For this infrastructure ( power, transportation, roads, water etc) needs to be augmented which will release more land for development both vertically and horizontally.

Therefore the budget should continue to allocate maximum funding into infrastructure and more importantly timely implementation of projects is required.

The author is chairman and managing director, CBRE South Asia Pvt Ltd

Union Budget 2012-13: Complete coverage
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