Real Estate pitches for more foreign direct investment

Source: The Economic Times
MUMBAI: The booming realty sector wants a status equal to telecom and aviation with amendments in the foreign direct investment guidelines to boost construction and infrastructure development in the country. "The realty sector is growing at a dizzying pace of almost 30 per cent each year. The bulk of construction activity - 80 per cent - is dedicated to housing, while the rest is commercial, including offices, malls, hotels and hospitals," said Akruti City Ltd Managing Director Vimal Shah. The double-digit growth in this sector is mainly on account of offshoring of business including high-end technology consulting, and improved techniques employed here. "In order to give a further boost to this sunrise sector and make mass urban housing affordable, tax exemptions are necessary in the next union budget. Then, property prices can come down by up to 20 per cent, bringing more people into the self-owned housing net, and enable the industry grow in far flung areas rather than urban conglomerates," Shah said.
The realty industry wants this crucial sector to be given the same status as telecom and aviation with amendments to FDI guidelines for townships, housing, construction activities and built-up infrastructure. "All FDIs in this sector should be treated as portfolio investment." According to Shah, the real estate sector is among the highly taxed sectors in the country and there was need to rationalise tax structures. "Presently, different types of taxes account for almost 45 per cent of the total project costs, which is passed on to consumers. This sector is already overburdened with taxes. Any further imposition of any form of tax would adversely affect growth," Shah said. One of the steps that could go a long way in boosting the sector was to make the equated monthly instalments (EMI) and interest on the first self-owned house totally tax-free. Presently, only interest on housing loans is tax-deductible, not EMIs. There is a strong need to bring down the borrowing costs in real estate sector and at par with international standards. "At present it stands at 70 per cent, which is way too high. This in turn forces the builder to increase the rates thereby discouraging buyers from purchasing small and medium properties." Realty is also unhappy with the leasing of commercial space that was brought under the service tax net in the last budget. "Leasing of commercial space should be taken out of the ambit of service tax. The increase in the service tax is nothing short of a punch in the face for individuals who have already either given or taken the premises on rent or those who are planning to do so in future." Since the government has made a positive move and brought down the import duty on cement, it should also bring down the import duty on steel to make sure both cement and steel are easily available. At present, the peak import duty on steel in India is 30 per cent, although the recent freight concessions in the railway budget is expected to have a positive impact, he said.