Real estate startups expect Union Budget 2018 to compensate the losses caused by DeMo, GST and RERA

The real estate companies expect the Union Budget 2018 to be favourable to the industry so that the adverse effects of the economic policies in recent years are diluted to a certain extent. After the demonetization in 2016, the government followed up with other policies, like the GST and the inception of RERA. The combined effect of these policies slowed down the industry. The developers faced a tough time in 2017 and expect the budget to favour their growth in 2018. By 2030, the real estate and construction sector in India is likely to be the third-largest in the world. It will contribute to around 15% of the GDP of the country, according to National Real Estate Development Council (NAREDCO). However, the recent slowdown in the real estate economy of the real estate industry is a concern for the developers. Evidently, the real estate companies in India expect the government to come up with a budget that will ease up the stagnant condition of the industry caused by demonetization, GST and RERA.

The tax rates in the industry have increased from 5.5% to 12% with the implementation of GST. Besides, the norms set up by RERA have come to play in the real estate sector. A number of startups are coming up in the industry and they are offering co working space. In the 2017 Union Budget, union finance minister, Arun Jaitley cut down the capital gains tax from three years to two years. The startups will benefit from this move, in selling their property two years after purchasing them, in case the traction did not fulfil their goals.

One of the key areas where the developers want the government to focus on is the GST rate. They feel that the rate is unpleasant and expect the rate to be reduced. Prior to the implementation of GST, the real estate buyers had to pay 4.5% as service tax and 1% as VAT, while selling a property. After implementation of GST, they have to pay 12%, which is considered to be high.

The stamp duties have added to the burden of the companies. As the GST in the real estate sector is high, the stamp duty is expected to be low. The developers are hopeful for certain measures that will ease up the situation in the industry, particularly after the guidelines implemented by RERA. The situation is quite challenging and they want the government to come up with a budget that will favour their growth.

Although the REITs were announced last year, they have remained unimpressive so far. The investments have not increased to a satisfactory level. Focussing on this domain will ease up the sale of under construction projects in India. The developers want the GST to be reduced from 12% to 6% in the real estate industry. The bracket of tax deduction on payment of interest for a property has to be increased. Apart from this, the government policies are expected to give affordable housing a boost. Besides, the smart cities are likely to cut down the pressure on the metros. This will also boost up the sale of commercial Real Estate in India. Evidently, the real estate developers expect Arun Jaitley to focus on these issues and come up with a Union Budget that can reduce the negative effects of the economic policies in the industry.