Real Estate Developers & Industry Experts on FM Nirmala Sitharaman’s Highlights!
Union Finance Minister Nirmala Sitharaman has announced more stimulus measures to boost growth. It comes a day after the the Union Cabinet approved a ₹2 lakh crore production-linked incentive (PLI) package to boost demand in the country.
For primary residential real estate sales, relief on the difference between circle rate & agreement value up to 20% vs 10% earlier has been provided. Other measures include:
-Income tax relief for developers and home buyers.
–Support for Construction & Infrastructure-Performance security on contract to be reduced to 3% instead of 5%. Earnest Money Deposit will not be required for tenders and will be replaced by Bid Security Declaration. Relaxations will be given till 31st December 2021.
-This extra budgetary resource being provided will help 12 Lakh houses to be grounded & 18 Lakh houses will get completed as a result.
– ₹18,000 crore will be provided over and above the budget estimate which was mentioned in the Budget 2020-21 under Pradhan Mantri Awas Yojana. particularly for the urban areas.
– ₹1.46 lakh crore boost for Aatmanirbhar Manufacturing Production-linked incentive for 10 champion sectors.
–Guaranteed credit support for 26 stressed sectors identified by the Kamath Committee. Original ECLGS had one year of moratorium and 4 years of repayment, the new scheme will have 1-year moratorium and 5 years of repayment.
–-The existing Emergency Credit Line Guarantee Scheme extended till 31st March 2021.
-If new employees of requisite number are recruited from October 1, 2020 to June 30, 2021, the establishments will be covered for the next two years.
Real Estate Developers & Industry Experts on FM Nirmala Sitharaman’s Highlights!
Dr. Niranjan Hiranandani – National President – NAREDCO and MD- Hiranandani Group
MEDIA COMMENT: Exemption under section 43CA, Income Tax Act “Differential above 10 per cent between circle rates and agreement value translates into tax penalties under Section 43CA of the Income Tax Act. This has been a major stumbling block for price rationalization,” said Dr. Niranjan Hiranandani, President, NAREDCO and Assocham. “This pinches, especially when it comes to liquidating unsold inventory. Industry bodies like NAREDCO have been pointing out the urgency with which this needs to be sorted out, and the Hon’ble Finance Minister, in a limited-period offer (up to 30 June 2021), has enhanced this differential from 10 to 20 per cent. This is welcome. The FM also mentioned a cap on the flat value to be eligible for this – Rs. 2 crore. This will result in most projects in Metro Cities not being able to take advantage of this, it has consistently been pointed out by industry bodies that price points in Metro Cities need to be kept in mind while offering any such relaxation,” he pointed out. He went on to add that the ideal situation would have been one where this relaxation would be applicable to commercial real estate transactions as well. “Real estate as an industry and end-users, both would benefit if these two suggestions can be incorporated,” he concluded.
“Funding issues have been a major challenge for real estate,” said Dr. Niranjan Hiranandani, President, NAREDCO and Assocham. “Finance Minister Nirmala Sitharaman’s announcement, about additional funding of Rs. 18,000 crore for PM Awaas Yojana-Urban will add to the sparkle this festive season. This is over and above the Rs 8,000 already allotted this year, and will translate into more homes for home seekers, more employment opportunities as also good business for suppliers and industries peripheral to real estate and construction,” he concluded.
Satish Magar, President, CREDAI National
Welcoming the Atamnirbhar 3.0 Announcements, CREDAI President Satish Magar said, “The slew of measures announced by FM Today will have an overall positive impact on the economy and will definitely boost employment and provide some relief to the ailing real estate sector. Launch of ECLGS 2.0 that extends additional credit of upto 20% outstanding as on 29.02.2020 to accounts that were Standard (SMA 0) as on 29.02.2020 is a welcome step. This will address the liquidity crisis to a certain extent. The one-year moratorium on principal payment is encouraging too. However, the restriction of SMA 0 accounts will deprive many borrowers particularly real estate developers. CREDAI hopes that the Government in line with Real Estate sector demand would reconsider the restriction of SMA 0 accounts.
Affordable housing has been a focus area of the Government and the additional outlay of 18000 Crores for PMAY Urban will encourage many developers to consider taking up housing project under PMAY Urban. Project approvals announced under SWAMIH Fund have been aiding projects that were stuck in the final phase due to completion of projects. The Government may consider making industry recommended relaxations to the eligibility criteria so that many more developers can access SWAMIH Funds.
CREDAI welcomes the increase in safe harbor limit from 10% to 20%.CREDAI has been requesting Government to increase the permissible difference between selling price and circle rates (till 30 June 2021 )as this would help developers to offload long standing unsold inventory without having any liability under section 43CA for developer and under section 56 (2)(X) of IT Act for homebuyers.
The RE sector stands by the Government in these challenging times and shall continue to provide jobs to Hundreds of Millions of construction workers and fulfill the dream of owning a home of fellow citizens.
Manju Yagnik, VCP, Nahar Group and Sr. Vice President, NAREDCO Maharashtra
“Finance Minister Nirmala Sitharaman’s stimulus measures in terms of income tax relief for buyers and developers is very timely and will further boost the housing demand in the country. The income tax relief of up to 20 per cent for homes costing up to ₹ 2 crore available till June 30, 2021 will bring in much needed fresh buying in the sector. This move to incentivize buyers will ensure the first-time home buyers and fence sitters to also enter the market resulting into good sales in next few quarters. The additional outlay under PMAY will help the completion of stuck projects, create new jobs, and boost demand for raw materials.”
Ashish R. Puravankara, Managing Director, Puravankara Limited
“Today’s announcements by the Finance Minister will undoubtedly uplift sentiments of all the stakeholders in the realty industry. In a bigger picture, these stimulus measures will go a long way towards job creation and infrastructure development in the country. Industry-wise, the increase in threshold limit for circle rate and transaction value will help developers, especially in the Mumbai market. From the buyers perspective, this, along with the Income Tax relief, will encourage fence-sitters to expedite their decision to buy/ invest in a home. As it adds up to prevailing low home loans rates and betters offers given by branded developers, make it an ideal scenario for home buying.”
Milind Korde, Managing Director, Ananta Landwise
“The pandemic and subsequent lockdown greatly impacted India’s economy, real estate being one of the most adversely affected sectors. The relief provided under the government’s Atmanirbhar Bharat 3.0 package will boost sales momentum and bring down the overall inventory levels in the housing sector. The real estate sector is on the cusp of a recovery path and would require such interventions to stimulate demand and incentivise the consumer to purchase a home. In the months to follow, more such relief packages would help reduce the adverse economic impact of the past few quarters on the real estate sector, in the process creating more jobs and boosting the larger economy,”
Nakul Himatsingka, Managing Director, Ideal Group
These measures are very positive and shall help in closing a lot of deals and boost real estate demand. Clients will also benefit as builders will be able to offer their apartments at a more attractive price.
Abhishek Bhardwaj, Chief Marketing Officer, Shristi Infrastructure Development Corporation Ltd
As per the latest announcement, the Income tax relief for developers and home buyers will boost housing sales. It is expected that a lot of clearance of inventory will take place as customers will end up paying lesser.
Arya Sumant, Managing Director, Eden Realty
The additional outlay of Rs 18,000 crore for PM Aawas Yojana- Urban announced by the FM today will help the first-time home buyers in general and affordable housing segment buyers in particular. The relief provided for difference in circle rate and agreement value up to 20% will help both the buyers and developers. We believe that these will surely help in rejuvenating the real estate sales.
Anuj Puri, Chairman – ANAROCK Property Consultants
Giving a major boost to residential real demand amidst the ongoing festivities, the FM today announced income tax relief for developers and homebuyers. The increase in the differential between circle rates and agreement value – from 10% to 20% (under Section 43CA) – is indeed a good move. This limited-period offer (up to 30 June 2021) will benefit both developers and homebuyers.
For homebuyers, it is a clear added financial benefit to round off the existing offers and discounts. Additionally, the consequential relief up to 20% to buyers of these units under Section 56(2)(x) of the IT Act for the said period will definitely boost demand, especially in the affordable and mid segments.
For developers, this move will help clear unsold stock. As per ANAROCK Research, there are approx. 5.45 lakh unsold units across the top 7 cities priced up to INR 1.5 Crore while another 49,290 units priced between INR 1.5 Cr to INR 2.5 Cr.
The additional outlay of INR 18,000 crore for PM Awas Yojana (PMAY – Urban) is another welcome step towards fulfilling its vision of Housing for All by 2022. The additional outlay is over and above INR 8,000 crores already spent this year. It will help 12 lakh houses to be grounded and 18 lakh houses to be completed. This will help bridge the housing gap in the country to a good extent and is simultaneously an excellent economic growth driver by creating more employment.
Five years after the implementation of this ambitious scheme, Pradhan Mantri Awas Yojana (Urban) has made steady progress across states. As of August 2020, a total of 1.06 crore homes had already been sanctioned in the country, of which 33% or approx. 35.18 lakh homes are completed while another 66.23 lakh units have been grounded for construction.
Anshuman Magazine, Chairman & CEO – India, South East Asia, Middle East & Africa, CBRE
“Following the announcement made by Hon’ble Finance Minister Nirmala Sitharaman, the industry welcomes the measures announced today by the Government towards boosting demand and strengthening the economy. The announcement of additional outlay of Rs 18,000 crore for PM Awaas Yojana(urban) is a step in the right direction towards fulfilling the vision of Housing for all, which will lead to generating employment along with supporting other industries, having a multiplier effect on the economy. Income Tax relief for developers and home buyers will encourage transactions and attract first time homebuyers. In addition to this, the infrastructure debt financing support announced by the government in the form of RS 6000 Cr equity will attract more investments in infrastructure development. All these measures will collectively improve India’s competitiveness and will go a long way in boosting the initiative to build a ‘Self Reliant’ India.”
Shishir Baijal, Chairman & Managing Director, Knight Frank India
“The prolonged COVID-19 crisis and anticipation for the vaccine has kept consumer demand on tenterhooks. However, the government and central bank measures since the pandemic outbreak have been encouraging and in the right direction to support industry and boost consumer demand. Today’s stimulus measures will aid job creation and infrastructure development in the country. Recognition of real estate as a core sector, creating ancillary industry demand and employment, and enhanced Pradhan Mantri Awas Yojana – Urban allocation, will boost the housing demand in the country. Besides, the increase in circle rate and transaction value threshold from 10% to 20% will remove a transaction hurdle and save tax thereby increasing the opportunity for unbridled property purchase activity.”
Subhankar Mitra, Managing Director, Advisory Services, Colliers International India
“The relaxation on EMD, Bank Guarantee and Performance security are very practical and timely. It will encourage start-up companies, that do not have large balance sheets, to participate. However, there is one big challenge associated with the infrastructure segment, which is about timely payment for the completed jobs. Such delays cause stress for the private sector and further trickle down to vendors, supplies, financiers and in the entire value chain. The announcement of extending Income Tax benefits to home buyers is particularly interesting. In many places Government Rates are higher than the market. The Developers and Home buyers cannot take the benefit of lower prices if the property is registered below 10% than Government Rates. The proposed divination of 20% will allow the market to find the right price points which will help both buyers and sellers”.
Piyush Gupta, Managing Director, Capital Markets & Investment Services, Colliers International India
“The Government has taken tangible steps for the Real Estate Sector to enhance credit in the business and stimulate sales in the residential sector. By providing Collateral Free Guaranteed Credit at capped capital cost for supporting stressed sectors (including Real Estate) will infuse significant liquidity in the sector and fast pace completion of Projects. This credit will also include borrowers who were delayed up to 30 days, pre COVID, so wide range of developers will be able to benefit from this without providing additional security. Further, allowing sale of Residential Units at prices lower (up to 20% lower from the circle rate) will incentivise developers to clear the unsold inventory and not worry about deemed taxation on the difference.”
Ashoo Gupta, Partner, Shardul Amarchand Mangaldas and Co.
“These announcements clearly emphasis Central Government’s committed focus towards making affordable housing development a widespread reality in India over the next 5 years to 7 years.
The Government’s push by way of regulatory support and financial incentives to the key stakeholders e.g. single window clearance/fast tracking approvals, accelerating the pace of development of housing and related infrastructure development, creating rental and ownership housing, improving affordability by offering tax incentives to developers, lower stamp duty, interest subsidies to buyers, are steps in the right direction towards facilitating affordable housing segment to be at the epicenter of the real estate sector and provide housing to all sections of the society at affordable prices.”
Arindam Guha, Partner, Leader – Government & Public Services, Deloitte India.
“The total stimulus adds up to around 1.2% of GDP and while some part of the SME liquidity support etc. would be channelized through banks and NBFCs, there is a fair amount of direct funding support from the Government.
A significant outlay has been proposed for production linked incentives. While the quantum of support is significant, this can be funded through the additional taxes and levies collected on the incremental production by concerned companies. The design of the incentive schemes need to keep in mind the differing sizes of manufacturers, ease of application / supporting documentation, facilitating movement of stand-alone units to industrial clusters where they can leverage common facilities etc.
The NIIF debt platform and additional equity contribution of Rs. 6,000 Crores for the debt platform is a welcome step. The plan to raise Rs. 95,000 Crores of debt to fund the NIP, including corporate bonds, is quite ambitious. This would require active participation of pension & insurance funds as well as a bond market with adequate liquidity and depth and is likely to need a relook into the investment guidelines for pension & insurance funds as well as streamlining trading & settlement processes on bond trading platforms.”