Real estate sector should work towards improving credibility, target new middle class

Narendra Modi

Despite being the chief driver of the economy and the second largest job provider in the country, the real estate sector suffers from a credibility deficit among homebuyers and should therefore focus on improving its image, Prime Minister Narendra Modi said.

Speaking at CREDAI YouthCon 2019, an event organised by CREDAI in the national capital, he expressed concern over the credibility of the sector and asked developers to improve their image that had been impacted by defaults by some builders.

He also asked the developer community to target the ‘new middle class’ as a large number of people were emerging out of poverty. “Now is the time, the target should be on neo middle-class category, whose aspirations need to be understood  as they are a large market waiting to be tapped for the sector.” Modi stated.

“Real estate sector plays a catalytic role in providing employment. Do you get enough respect? Who is responsible?” he asked.

Modi said the Centre has been trying to bring a positive change in the real estate sector during the last four-and-half years.

Demonetisation curbed use of black money in the sector, Modi said, adding his decisions face problems in the beginning as he thinks ahead of time. “Due to demonetisation, the avenues of escape through real estate, for those who have been able to profit due to corruption and black money, have been blocked,” he said.

He also said that the government is constructing homes under the Pradhan Mantri Awas Yojana (PMAY) at a rapid pace to fulfil its ambitious target of providing Housing to All by 2022, adding that 1.5 crore houses for the poor have been built at twice the speed to realise this target.

He said there is no corruption in identifying the beneficiaries under the PMAY. “By 2022, all homeless will get a house. We do not make tall claims. Under the previous government, 8 lakh houses were built in 10 years for the urban poor, but in four and a half years, we have built 15 lakh houses,” he said, adding that under PMAY, houses have become bigger, with necessary amenities in place.

Modi said the government has provided a credit linked scheme, which could provide savings worth Rs 5-5.5 lakh on housing loans for the middle-class.

He said the new realty law RERA and benami property legislation have helped in bridging the trust deficit between builders and consumers. “Since the introduction of RERA, close to 35,000 real estate projects and 27,000 organisations have been registered under it.”

There has also been progress on the ease of doing business front and construction permits are being given at a faster pace, he said.

The Prime Minister said the tax sops announced in the interim Budget will benefit both developers and homebuyers. “The move to exempt people earning up to Rs 5 lakh from payment of income tax will benefit the housing sector as the surplus will find its way into real estate. The youth will be encouraged to buy a house because of this exemption,” Modi said.

To boost purchase of second homes, he said his government has announced capital gains of up to Rs 2 crore could be rolled over for investment in two housing units from the current one unit only. It also exempted tax on notional rent on a second self-occupied house.

For boosting affordable housing, the Prime Minister said 100 percent deduction of profit under Section 80-IBA of the Income Tax Act is being extended for one more year to housing projects approved till March 2020. He added that the period of exemption for levy of tax on notional rent on unsold inventories has also been extended from one to two years.

Modi said GST on the sector has been reduced to 8 percent for affordable housing and 12 percent for other under-construction homes. “The GST rate on various construction material has also been brought down to 18 percent from 28 percent.”

Earlier, Niti Aayog CEO Amitabh Kant asked builders to construct flats in 8-10 months to make projects viable as interest rates were very high in India. He also favoured lowering of GST on under-construction properties.

“When a middle-class family books a flat, you people take 5-6 years to complete construction of that flat. As interest rates in India are too high, so if interest rates for 5-6 years are taken into account, project becomes unviable. So, you people must complete construction of house in 8-10 months,” Kant said.

Housing and Urban Affairs Minister Hardeep Puri said housing is a basic need for development. “The Prime Minister’s dream of providing a home for all is not a dream anymore. It is a process which is at a very advanced stage of implementation.”

Speaking at a session on Global Housing Technology Challenge, Durga Shanker Mishra, Secretary Ministry of Housing and Urban Affairs, said, “With the help of GHTC-India, we want to develop an ecosystem for a New India, wherein we are up-to-date with the latest technologies in the construction sector.”

Sessions being held at the two-day Credai YouthCon have focused on how Housing for All and RERA have changed the game for the real estate sector, the importance of finance in India’s growth story and look at times when finance met real estate.

CREDAI YouthCon is the annual Youth Conclave of CREDAI held to bring together the future of the real estate sector in India. The CREDAI Youth Wing was formed to bring together the next generation of real estate builders and developers in order to nurture them to become better professionals, a CREDAI statement said.