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Interest subventions on home loans key to 'Housing for All', says NAREDCO Prez
New Delhi, Jan 22 - With a target in hand to achieve 'Housing for All by 2022, the Centre should consider providing full interest subvention on affordable loans for those who are purchasing their first home, said Rajan N. Bandelkar, President of National Real Estate Development Council (NAREDCO).
NAREDCO is an autonomous self-regulatory body under the aegis of the Union Ministry of Housing and Urban Affairs.
"The government aims to provide housing for all Indians by 2022. In 2014, It was fair enough to say that by 2022 we will fulfil our goal... We are already in 2022 and there are still many people staying in rented premises. In the interest of consumers, we as developers feel the Centre should consider something on the interest subvention," Bandelkar said in an exclusive interview with IANS.
In 2019, the Centre in its Budget, increased the maximum amount of interest paid on a housing loan -- valued upto Rs 45 lakh -- eligible for tax benefits to Rs 3.5 lakh from Rs 2 lakh under the affordable housing plan, initially for a year.
Again in the 2020 Budget, the same was extended for another fiscal year i.e. till March 2021.
"They have increased it to Rs 3.5 lakh while keeping the cost of the property capped at a maximum of Rs 45 lakh. Interest on loans worth Rs 45 lakh typically breaches Rs 3.5 lakh levels and there would be few beneficiaries who would be able to reap benefits under the scheme. Hence, the Centre should remove the limit with open hearts for first home buyers," Bandelkar said.
He further said the Centre may have apprehensions that property prices may shoot up with such full interest subventions. But it is not the case as people having their first home would apparently not intend to invest on a second one.
Also, NAREDCO would assure all possible support that may be needed, in achieving the 'Housing for All' goal by 2022, he added.
On access to finances, Bandelkar said banks typically prefer to lend to large players.
"When the government extends ECLGS, the rate of interest declines substantially. So, for those players who are into affordable housing space, the government must guarantee those loans just like the ECLGS."
On capital gains in the real estate market, he said it should be at par with capital markets.
"The one-year capital gains in the share market is 10 per cent and for real-estate it is 20 per cent for a two-year period. For real-estate too, it should be brought down to 10 per cent," he opined.
He also believes the government should once again resume input tax credit facility under the GST for the real-estate sector.
"Both the options should be open and the developers will choose whether to opt for the ITC or otherwise, according to their preferences."
On asked about the possibility whether the Centre, in FY23 Budget, would continue to focus on capital expenditure or shift towards welfarism, he said: "Focus on capital expenditure is a good thing. It leads to employment generation besides keeping money in circulation. Capital expenditure is always better as we are a developing country and we must focus on that. See, real estate is the major employer after agriculture and nearly 250 industries are dependent on the realty sector."
To tide over the Covid-19 crisis, a "booster dose" is needed on the capital expenditure front, which would in a way, directly or indirectly, support the real estate industry.
"For the real estate sector to grow, affordable housing must grow as the majority of the volumes come from it. In comparison, the luxury segment is very small."
Besides the affordable home segment, commercial space is also seeing an uptick in demand post pandemic.
"Almost all ready properties are leased out and the commercial sector is expected to pick up (further). Also, because of businesses via e-commerce, the warehousing business has also turned attractive."
On the recent trend of warehousing business going into the hinterlands, he said it is because of low cost of land as well as it helps in efficiently delivering services to the last mile.
"Because of this, rural areas have also started witnessing development, job creation, and revenue generation."
Moreover, on being queried about the potential impact of the ravaging third wave of Covid in the realty space and whether the potential homebuyers would defer their purchase plan, he opined that there would be no material change in demand.
"States must come up with reduced stamp duty and premiums on properties...Taking cues from those states where it had been done recently, others must follow suit and replicate the same and take the benefits."
He said that Maharashtra has reaped the benefit because of the reduction and therefore requested the State government to reduce the stamp duty once again.
In a bid to provide a boost to the realty sector, the Maharashtra government reduced the stamp duty on property registrations during September to December in 2020 and January to March in 2021.
On declining profit margins due to rising commodity prices, he said so far the developers have not raised the property rates.
"Having that said, now property rates may start increasing. Initially, we thought it was a temporary pressure on inflation and will subside gradually, but it is not the case. If prices of steel and cement don't ease, prices are bound to rise."
"In some places, some large developers have already taken a price hike by 5-10 per cent in the affordable housing segment."
Lastly, for smooth and effective functioning on the regulatory side, Bandelkar said that all the approving authorities must come under the ambit of the RERA.
(Animesh Deb can be contacted at email@example.com)
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