Developers in the realty sector, which is facing severe credit crunch due to higher interest rates, expect the government to relax norms for repatriation of FDI and external commercial borrowings (ECBs) in the forthcoming Budget for 2012-13. The industry expects the Budget, to be announced on March 16, to relax norms for FDI and ECBs, especially for township projects that will give developers source funds at a much reasonable cost.
"The real estate sector has witnessed rapid growth in the recent past. However, raising funds continues to be a big constraint for us. We expect some policy decision on FDI in real estate that will benefit the market greatly," Puranik Builders Managing Director Shailesh Puranik said.
Currently, it is not possible for foreign investors to repatriate real estate investment proceeds for three years, which is hampering investment flows, Jone Lang LaSalle Chairman and Country Head Anuj Puri said. "Relaxing norms for repatriation of realty FDI is the need of the hour. The market environment needs to be rendered more investment-friendly," he said.
Besides this, the sector is hoping to get industry status as it is a major driver for economic growth and generates jobs across various verticals. "The real estate sector is the second largest employer contributing 5% to the GDP and generating large-scale jobs across its varied verticals.
"The sector should be given an industry status that will enable developers to have access to debt lending at competitive rates from banks and financial institutions," said Sunteck Realty Chairman and Managing Director Kamal Khetan.
Realty players are also expecting sops for affordable housing and want it to be given priority in lending in order to address the acute housing shortage.
"We expect revision in tax for affordable housing projects in order to address the acute housing shortage in the country. The Government should consider abolition of service tax for residential apartments up to Rs 50 lakh to promote affordable housing. Besides, affordable housing should be classified as priority sector lending to ensure easy availability of funds for projects," Housing Development & Infrastructure (HDIL) Vice-Chairman and Managing Director Sarang Wadhawan said.
Developers are also expecting the Government to increase the subvention of 1% on interest rate to be available to broader price band. They said that while tax incentives should continue for developers in the affordable segment, the subvention of 1% on interest rate should be available to broader price band.
To benefit home buyers, it is necessary that the last year's interest rate subsidy of 1% is continued. The limit for the scheme should be raised from Rs 20 to 30 lakh due to increase in cost of raw materials and various taxes incurred during home buying," Sanghvi Group Director Shailesh Sanghvi said.