The forthcoming budget announcement by the finance ministry of the
new government is a critical one. It will be the first step on the
‘walk’ that must follow the electoral ‘talk’ of economic recovery and
ushering in new, growth-oriented policies for the country. At this
stage, every industry in the country – from textiles to agriculture,
from aviation to tourism, from manufacturing to banking and allied
financial services, from pharmaceuticals to information technology, from
telecommunications to healthcare and from retail to real estate,
depends on major fiscal reforms.
It is not only India’s continued
viability in the global sweepstakes that is at stake now. The very
welfare of its people and a revival of their trust in their country are
on the ‘critical’ list. Over the past few years, the confidence
that Indians have in the power of a ruling government to revive its
flagging fortunes has been seriously eroded. Bureaucratic muddle,
corruption and policy paralysis have become accepted norms. The arrival
of a new and very proactive government at the centre is the first sign
of real hope for positive change.
Boost industrial expansion and output
A
country’s economic health rides on how well its primary industries
perform. It depends on how encouraged these industries are to expand,
how many jobs they create in the bargain, to what degree foreign funds
are attracted and encouraged to invest in various industries and how
much consumption increases because of all these factors. The consumption
sentiment is one of the most critical, because it dictates how well
various sectors will perform.
Real estate is just one of the many
major industries in India. A government focused on the country’s overall
economic revival must consider the needs of all its industries. This
holds true even if real estate is an industry that, unlike other
industries such as electronics and luxury apparel, addresses very
visible deficits. Residential real estate addresses the deficit for
housing in India, while consumption of commercial real estate is
directly related to how many jobs will be created in a certain city.
Increase financial confidence and boost consumption
Given
that overall consumption sentiment is the key, the new government will
primarily need to present a budget that increases Indians’ financial
confidence. To achieve this, it will have to introduce a more benevolent
taxation regime. Specific to boosting the real estate sector, the
government must formulate and present a policy which provides clear and
attractive tax benefits to developers who are focused on affordable
housing. At the same time, raising the income tax exemption limit for
home loans from the current Rs 1.5 lakh to at least Rs 5 lakh would
encourage Indians to buy more homes.
Such measures are very much
within the purview of the upcoming budget, which must also ensure that
it provides incentives to boost entrepreneurial spirit and generally
help Indians to earn more, save more and invest more. It is axiomatic
that the real estate industry, as well as various other industries, will
see significant revival merely on the basis of such a rebooted climate
of confidence.
Provide infrastructure status for housing
Real
estate faces several hurdles other than flagging consumption sentiment
that have harmed it immensely over the past few years of sectorial
slow-down. Clearing all these hurdles in a single revamp of existing
policies would be extremely challenging, if not impossible. However, one
game-changing measure that new government can certainly undertake in
the immediate future is to grant infrastructure status to the housing
sector.
In the past, such a provision has proved to be a major
turning point for the real estate sectors of many other countries,
enabling them to significantly narrow their housing deficits. While
such a measure would not fall within the ambit of budget announcement,
it can and should be addressed in the ensuing parliamentary monsoon
session.
So far, India has
only provided infrastructure status to industries and companies involved
in the development of ports, airports, highways, public transportation
networks, etc. By granting the housing sector infrastructure status as
well, the new government will ensure that housing developers become
eligible for critical incentives and subsidies at the Central and State
levels. It will also mean that institutional lending to the housing
sector becomes more liberalized – banks will increase lending to housing
developers, who will also be able to raise bonds to help generate
funding for housing projects.
Source : WEB