With Budget 2019 around the corner, the real estate industry is eagerly waiting to check what is in store for the sector ahead. While getting an industry status is one of the top-most priorities, here are some of the other expectations pertinent to the commercial real estate market.
As the new Finance Minister is all set to present the maiden budget on July 5, 2019, the real estate industry is looking forward to significant reforms that would help the sector revive post the existing liquidity crunch. Listed below are some of the major expectations of commercial players in the market.
Green low-carbon-footprint buildings and interiors
The Government should make Green buildings with LEED certification mandatory in the times to come. Additionally, the interiors should be designed with the intent to reduce carbon footprint. The Government should, therefore, incentivise the developers and occupiers so that they adopt green technologies. With several rating systems for green buildings already in place, the upcoming budget should provide tax breaks for green and low carbon footprint buildings and corporate interiors.
The Government can consider providing accelerated depreciation benefits to incentivise the commercial real estate industry. This will ensure expansion and investment in Capex-Interior projects. Simultaneously, the deduction applicable on interest paid on home loans can be increased for self-occupied houses. Additionally, income tax deductions can be offered to those who are buying properties within the affordable segment. This will provide crucial support to this segment as affordability is a substantial constraint on demand.
Tax rationalisation for Goods and Services Tax (GST)
It is required that GST input credit be allowed on work contract services for construction and office interiors. This is owing to the fact that it has a direct connection with the business activities. The said move will encourage the industries to undertake capital expenditures. The Government should further consider centralised GST return in case of suppliers who are providing works contract services in various States, thereby reducing the compliance burden. In addition to these, there is a need to expedite GST refunds for SEZ projects and Micro, Small and Medium Enterprises (MSME). Consequently, there is also a need to complete the refund process within 45 days of the filing of the application.
Single window clearance for approvals
Post the implementation of the Real Estate (Regulation and Development) Act (RERA), the induced transparency has forced the developers and approval authorities to maintain high levels of compliance and efficiency. The upcoming budget should further cement this streamlined process and implement single-window clearance for commercial real estate. This will ensure speedy approval of projects, hence providing increased time to market the projects along with enhanced certainty.
Real Estate Investment Trusts (REIT)
We believe that REITs have the potential to enhance the supply of commercial real estate, which provides the foundation for a thriving employment ecosystem. This invariably helps to create a thriving residential real estate market. To make REITs more attractive to investors, long-term capital gains having a holding period for REIT units should be reduced to one year which is at par with equity investments.
All in all, the interior industry should be provided with separate Industry status and benefits. India has great potential to export global designs internationally which needs to be encouraged by the Government.
Subsidies provided to the realty sector have helped the market grow initially. Keeping the said fact in mind, we expect that the government will further subsume stamp duty in GST, which will help to make the sector more attractive.