Seeks better housing, better taxation and provision of sustainable infrastructure
-- The Royal Institution of Chartered Surveyors (RICS) recently submitted its proposal for the Union Budget 2010-11, to the Ministry of Finance, seeking incentives for a vibrant and sustainable property market. With an objective to represent the collective voice of the the real estate and construction sector, the proposal was jointly drafted by the RICS Working Committee on Real Estate and Housing, which constitutes senior management across key real estate development firms, construction firms, international property consulting firms and real estate funds in India.
While the fiscal deficit has widened in recent years, RICS believes that fiscal consolidation should not be overly hasty in the coming years as a commitment to investment in public infrastructure is a necessary pre-condition for improved productivity to boost the long term trend rate of growth in the economy.
RICS believes that the main thrust of fiscal consolidation should come from a simplification and widening of the tax base and has set out specific measures in relation to the property sector. It expects further interest rate hikes during the course of 2010 as the RBI moves to dampen growing price pressures and gradually exits from unconventional emergency policy support measures.
Reducing stimulus measures too quickly runs the risk of provoking a second downturn in the economy, particularly if the global environment remains sluggish. It also runs the risk of limiting the pool of development finance which will be necessary to meet the likely demand for affordable housing over the next 5 years. As such, RICS recommends that a gradualist approach to removing policy stimulus is adopted during 2010 to offset expected tightening in monetary policy. The organisation also believes that more needs to be done to address the blockages in the planning systems which have contributed to the run up in land prices.
Summary of policy recommendations by RICS Working Committee on Real Estate and Housing
Housing for all
- Current system of tax deductions for home loans should be increased in tandem with increase in property prices; recommend an increase from Rs 1.5 lakh to Rs 3 lakh for interest payments and from Rs 1 lakh to Rs 2 lakh for principal repayment.
- Tax breaks and extension in tax holiday under Section 80 IB (10) should be restored as incentive for housing development
- Provide exemptions and incentives for the promotion on rental housing
- Opening of the ECB route to the entire gamut of the real estate sector
- Housing development should be exempt from service tax
Improved consumer protection and fairer taxation
- Implementation of a central registry body to address incidence of housing finance fraud
- Supports the implementation of the New Direct Tax Code to simplify and improve the tax system
- Follow a phased approach in the implementation of GST
Provision of sustainable infrastructure
- Government should reintroduce Section 10(23G) of the Income Tax Act to attract private sector participation in infrastructure development
- Residential townships of ~30 acres to be classified as 'infrastructure'; should also apply where additional work is carried out to support housing development such as road building, installation of sewerage, solid waste management etc.; Tax breaks under Section 80-IA should include housing development
- Tax incentives could be increased for projects including low carbon power generation such as hydroelectricity and wind turbines or low carbon transport infrastructure
- Extend tax credits on the expenditure incurred on the installation and cost of energy saving technologies
On the submission of the budget recommendation, Mr. Sachin Sandhir, Managing Director and Country Head, RICS India said, "In India, timing and magnitude of the exit from policy stimulus measures are crucial for the sustainability of recovery in property and land markets. With further tightening of the monetary policy expected during the course of 2010, policy reforms and measures expected from the budget are crucial to the success of realty markets. While, the Government's commitment to improving infrastructure and housing facilities continues, tax breaks should be extended to include housing development. To this end it is advisable to broaden the definition of infrastructure to include urban services and townships. Also, the provision of the ECB route to be extended to real estate projects, other than townships could provide fillip by allowing access to long term sources of finance."
