The first set of fiscal measures announced by Union finance minister Nirmala Sitharaman on Wednesday would do little to whet real estate demand, which has seen sustained downturn even before the virus outbreak.
Realtors said the Centre should have incentivised customers to buy homes by way of further tax breaks or relief on the stamp duty, which in turn would have resurrected demand.
On Wednesday, the FM said the Union ministry of housing and urban affairs would advise all the states to treat Covid-19 as an event of “force majeure” (act of God) under Real Estate Regulatory Authority guideline and extend the completion date “suo moto” by six months.
Moreover, to enhance liquidity support and to assuage risk concerns a further expansion of partial credit guarantee scheme for NBFC/ HFCs (housing finance companies) has been provisioned. This is expected to enthuse lenders to look at the real estate sector favourably.
While a Rs 30,000 crore special liquidity scheme has been introduced, the FM also proposed a Rs 45,000 crore partial credit guarantee scheme. These measures would enable fresh lending to MSMEs and individuals.
However, realtors said liquidity is not as much an issue dogging the industry as much as the cost of funds.
Sushil Mohta, president of Credai Bengal and owner of Merlin Group in Calcutta, was quick to point out that realtors continue to pay interest at 10-12 per cent even as benchmark rate has fallen below 4 per cent.
“The banks should reduce the rate on existing loans. We are still paying very high interest at a time there is no cash flow,” Mohta said.
He hoped subsequent measures would be more specific to real estate, such as zero GST for under construction properties.
Shishir Baijal, chairman and managing director of international property consultancy Knight Frank, echoed the sentiment. “We now await to hear the subsequent announcements, that could resurrect demand and also boost the Infrastructure sector, to make a complete assessment of the impact on the real estate sector,” Baijal said.
A spokesperson for Credai national said the government should consider increasing the tax deduction limits for interest on home loans as sops to homebuyers.