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NAREDCO suggests one-time roll over of realty loans
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SME Times News Bureau | 26 Dec, 2019
As recent measures by the government to revive the realty sector have so
far not yielded results, the National Real Estate Development Council
(NAREDCO) has asked the government to provide a one-time roll over or
restructuring of loans taken by developers, among other suggestions.
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withdrawn since th customer of affordable housing homes cannot afford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.
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