Realty's expectations from Budget

We have approached the government to extend income tax benefits for developers in the affordable segment. HARSH VARDHAN PATODIA, PRESIDENT, BENGAL CHAPTER OF CREDAI

The Confederation of Real Estate Developers' Associations of India (CREDAI) is looking forward to the Centre as well as the State Budgets to help the sector address the needs of the home buyers. In an interview to Business Line, Mr Harsh Vardhan Patodia, the President of the Bengal chapter of CREDAI, representing more than 160 developers, talks of the industry in West Bengal, its budget expectations, the status of the sector in the State, the problems the sector faces, and the way forward for developers. Excerpts from the interview:

What are CREDAI's Budget expectations?

In case of the national budget, we are expecting benefits and incentives for the affordable housing segment. We have approached the government to exempt certain taxes and extend income tax benefits for developers who are into the affordable segment, and to consider reducing service tax for the segment.

We are also expecting certain rebates in terms of interest for financing the affordable housing segment, and liberalisation of finance towards real estate companies by institutions and banks. We are also looking forward to the sector being given an infrastructure developer status.

This apart, we have also proposed that there be certain income tax relaxations, especially in the form of rebate on housing loans for individuals.

What are your expectations from the State Budget (West Bengal)?

As far as the state budget is concerned, we need to re-look at the VAT provisions. There are stringent VAT rules here, as compared to some others. We also think that there needs to be a re-look at the stamp duty chargeable on properties, both in the affordable sector and overall.

Reduction in stamp duty in the affordable segment will help pass on the benefits directly to the consumer. In the general segment, the government needs to have a better valuation method for the properties.

We are going to send a memorandum to the state finance department to have a look into our proposals.

In terms of opportunities in the State, the extension of Metro railway routes is expected to come as a blessing for the sector. What does this mean for the sector? Are land and property prices expected to increase further?

The Metro route expansion and extension all around the city (of Kolkata) is indeed a good thing to happen here. This will open up a new area of real estate development in the vicinity of every Metro station. Three to five kilometres of the station will be a new area available for real estate development. With this area opening up, there will be a rise in stock for the affordable housing segment. Land prices in these areas are expected to change, and may go up depending on the development and the connectivity of the area with the city centre. Definitely, these new areas will have new opportunities in the real estate segment.

Which are the areas that need to be looked at in the Kolkata real estate market?

In the Kolkata real estate market, both flanks of the Eastern Metropolitan Bypass, extending up to Garia, the Garia belt consisting of Narendrapur, Sonarpur, going up to Baruipur. Then again, there is an announcement of the Metro Railway going upto Baruipur.

On the other side, there is an announcement of Metro Railway being extended up to Joka; areas from Joka to another five areas within that region would be a good area for real estate development.

Northern parts of Kolkata, like BT Road and Barrackpore, and some other areas like Barasat, Madhyamgram, are new areas because of extension of Metro. Some other areas like Howrah and Hooghly (adjoining districts of Kolkata) have also seen a traction because of the construction of the Belgharia Expressway which connects areas like Rishra, Uttarpara and Konnagar.

What is the current pattern in the real estate sector — both residential and commercial segments — in Kolkata?

The residential sector can be divided mainly into three segments without taking into consideration the economically weaker-section segment.

One is the MIG segment with ticket size between Rs 25 lakh and Rs 40 lakh, which is quite buoyant in the city. Since there has been a delay in launches of all the projects, the current pattern of sales in these projects is quite good.

The next segment has a ticket size of up to Rs 1 crore. But there aren't many apartments available in Kolkata at good (upmarket) locations in this segment. There could be competition in this area of the market. However, the ultra high-end apartments are like boutique developments. They have their own status and value, and have their own niche market.

In the commercial area market, there are a good number of transactions happening in the Salt Lake Sector V (IT hub area), following consumption by IT and Telecom players. In the Central Business District area, there are very few commercial developments taking place, and smaller officers are being taken up in these projects. Large offices are shifting to Sector V and Rajarhat (another satellite township).

WBHIDCO (West Bengal Housing Infrastructure Development Corporation) had once started projects in the PPP (Public Private Partnership) mode for affordable housing. But do you think that there is any scope for real estate development companies in this regard anymore?

In PPP projects, whatever the scope was there has happened. Now, the government is moving towards a more transparent mechanism of land allotment and offer, by way of auction and bidding process. We aren't very clear on the PPP policy of the present government, and we are in dialogue with the government to see what their take is on affordable housing. We are looking for indicators and directions from them in this regard. We will have to wait for the budget.

So are you looking for some incentives in this regard?

The government needs to develop the infrastructure (like connectivity, mass transport and basic amenities) in these peripheral areas (to the city) and proper policies to simplify the land conversion process. They also need to come out with a proper township policy to encourage land format development.

West Bengal is the only State to have an urban land ceiling act — does it impact development? Your comments.

Urban Land Ceiling Act is definitely a hindrance to the large-scale development of the State. And because of this, the supply of apartments in the city isn't as great as some other cities. If there is a policy to give exemptions for housing projects, it will probably increase the supply (of apartments) in the market, which, in turn, would regulate prices because of competition and help faster clearances and development of projects.

We have requested the government to have a re-look at the Act. An alternative would be to give us a policy for large format development in the private sector within the ambit of the Act, and give permissions or clearances to hold large land parcels for housing development.

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