In a recent letter to the Finance Minister with recommendations to revive the sector, NAREDCO has sought a one-time recast of loans in real estate as applicable in other sectors following the Reserve Bank of India's June 2019 order.
"Due to the downturn in the market and also failures of several big NBFCs, the developers are facing acute liquidity shortage. We recommend that the banks and financial institutions be given discretion to one time restructuring and/or roll over of their existing loans on the lines of loans to other sectors," said the letter signed by NAREDCO President Niranjan Hiranandani.
It noted that the RBI, through its June order, permitted the banks to restructure or roll over the loans at their option and in such cases, the borrower would retain the asset classification of the restructured standard accounts as standard and it would not be classified as a non-performing asset (NPA), but it is not applicable to the real estate sector. Eventually, restructuring of the loans to builders triggers the provisions related to NPA.
The industry body also said that subvention schemes should be resumed to boost demand in the sector. The National Housing Board (NHB) in July prohibited the subvention scheme, where the interest on home loans is borne and paid by the developer till the date of possession.
"We suggest that the said circular be withdrawn since th customer of affordable housing homes cannot afford paying EMI and also the rent till he gets possession. Subvention scheme also addresses the issue of interest loss due to delayed possession," it said.
NAREDCO also said that the Rs 45 lakh price cap for the classification of a property as affordable housing should be done away with as it keeps most of the projects in the National Capital Region (NCR) and the Mumbai Metropolitan Region (MMR) out of the ambit of "affordable housing".
The self-regulatory body, under the aegis of Ministry of Housing and Urban Affairs, also soought the reduction of home loans rate to 7 per cent per annum and said that the stamp duty rates should be reduced by 50 per cent for all the real estate transactions entered and agreements registered on or before March 31, 2020.
It further appealed that the goods and services tax (GST) on real estate related works contract be reduced to 5 per cent in case of affordable housing projects and 12 per cent in all other cases. The organisation also said that the GST on maintenance charges should be abolished among other GST-related demands.
Among its taxation related suggestions, NAREDCO said that Section 23(5) of the Income Tax Act should be done away with. The particular Section says that in case of unsold property, held as stock-in-trade, the annual value of the property for the period up to two years from the end of the financial year in which completion certificate is received from competent authority, would be taken as 'nil'. Thereafter, it would be assessable as income from house property on the basis on its notional income.
"This is an extremely 'subjective' criteria, which will obviously be open for misuse," the letter said.
Among other measures for rental housing, it suggested that there should be a 10-year tax holiday for real estate developers on profits earned from rental housing or income on renting of housing properties be taxed at a flat rate of 10 per cent as it would revive investment and boost a slowing economy.
( With inputs from IANS )