When Covid-19 gets treatment, the real estate economy will come back on track
Nothing happened in the current financial year that would give the business world an opportunity to celebrate. Revenue declined by about 10 to 15 percent in March amid a sluggish economy. This is the same time of year when the working class is expecting an increase in salary. Considering the atmosphere, he was also expecting a below-average increase. At the same time, companies were engaged in making their strategies according to the economic scenario. Then a disaster like Covid-19 came and threatened, and he messed up the equation further.
This disaster also gives us an opportunity to revamp our perspective. In such a situation, do not let it go in vain through some showy reforms, rather herald revolutionary reforms. The real estate sector also should not miss this opportunity. Real estate is the second largest employment provider sector in the country. It is estimated that by 2025 its contribution to GDP will be 13 percent and by 2030 the market size will be one trillion dollars.
According to various studies, the real estate sector affects more than 248 industries. This opens the way for manufacturing, cement, steel, ceramic, mining, paint, electrical, consumer durables, as well as services like management, mortgage and finance, and security agencies, yet this huge industry is often overlooked. In such a situation, a dose of reforms has become necessary to awaken this sleepy industry so that it will not only save itself in the crisis of Covid-19 but also become an important player of our economy in the long run.
The immense demand for all types of houses
In fact, real estate is capable of making good news. There is a huge demand for all types of houses in this market. There is immense scope for affordable houses, especially in the middle-income category. Policy-makers and governments have so far focused solely on low income and EWS houses. Apart from MID housing, commercial offices, and retail space, industrial real estate was ignored in this way. This strategy did not yield very good results. This created many difficulties for private companies. For example, there was a glut of rules ranging from expensive land and bad luck on the financial front. This can only provide limited benefits to the economy.
Duty, GST, other taxes and levies are 40 percent of the sale price of the house.
Medium-income houses are usually built-in 2,000 square feet, which are twice the size of EWS houses. They also include works such as tile flooring, MS grills, mirrored UPVC doors and windows, steel sinks to cupboards, electric fittings. It offers far more opportunities than EWS Housing but has encountered many obstacles in its path. The biggest hurdle among them is high taxation. According to a study, 40 percent of the selling price of a house is due to duty, GST, and other taxes and levies.
India will not be able to move forward on the path of fast economic growth without supporting real estate.
Without supporting the mid-income housing, real estate, and construction industry, India will not be able to move forward on the path of rapid economic growth. The Covid-19 disaster has severely affected the industry. In such a situation, it is our expectation from the government that if they follow these five suggestions, then not only will we overcome this disaster, but it will also lay the foundation of our good days.
The government should ensure 100% deduction on the amount paid to the person purchasing the house for the first time.
The first suggestion in this episode is that the government should ensure 100 percent deduction on the amount paid (capital and interest) to anyone who is buying a house for the first time from their income. The current limit of deduction is up to two lakh rupees. If this happens, all the people living on rent will be able to think about their house. There are already about four and a half lakh unsold houses in the market. With this scheme, not only will these houses be sold, but the dream of millions of people will be fulfilled.
Housing loans should be made available only at one percent more than repo rates.
Another suggestion is that housing loans should be made available at a rate of just one percent more than repo rates. This will provide huge support to the economy with benefits to the customers.
A home buyer has to pay stamp duty along with GST.
The third suggestion is to bring real estate, especially housing, under the purview of GST so that it does not get caught in double taxation. Currently, the home buyer has to pay stamp duty along with GST. This increases the price of the house. It also has adverse effects on the industry and the economy. Prior to GST, stamp duty was in the range of 5 to 7 percent, but now this item has an additional burden of 12 percent. This is completely unfair. While GST reforms may take time now, the scope for immediate relief can be explored by rationalizing stamp duty and circle rates. As a rule, stamp duty should not exceed 2 percent.
GST should apply only to the maintenance of services in the building
The fourth suggestion relates to a very poor taxation system like ‘GST on rent’. This increases the burden on the investor and asset manager, limiting investment in commercial real estate. In fact, GST should apply only to the maintenance of services in the building.
All stuck real estate projects should be started afresh
The fifth suggestion relates to all real estate projects stuck. They should be started afresh. The central government will have to directly help in this. This will not only create employment but will also develop the much-needed infrastructure. As a result, India will also emerge as an attractive investment destination at this critical juncture.
When Covid-19 gets treatment, real estate car will come on track
When Covid-19 gets treatment, like other industries, real estate carriage will be back on track as usual, but should we be satisfied with normalcy? This is the time when these reforms can lay the foundation of a strong economy. Is the Finance Minister listening to us?