Without heeding to the nudge from the government to cut prices to address the demand slump, real estate industry groupings on Tuesday sought more sops from the policymakers to help the battered sector.
Among other aspects, they are pushing to extend the definition of "affordable housing" to homes costing up to Rs 75 lakh as against a maximum of Rs 45 lakh right now, possibly with an eye on larger number of projects and buyers to enjoy already existing sops. Despite interest rates being set by market forces, Credai-MCHI (Maharashtra Chamber of Housing Industry) wants a reduction in home loan rates to 5 per cent as against a prevailing rate of over 7 per cent at which the best grade borrower can get money from financiers.
A few days ago, Union minister Piyush Goyal had categorically told the industry to lower the prices in order to take care of the inventory levels. Reports from the ground suggest the industry is yet to pay heed to the nudge.
Meanwhile, the industry keeps making newer and more radical suggestions for help, like the demand for a $ 200 billion stimulus made by a realtor recently, usually citing the trickle down effect which it possesses on various other sectors which can help lift the economic growth.
A recent report by Magicbricks, a property classifieds portal, said while the overall property prices across top eight cities remained range-bound with a decline of up to 5 per cent in some pockets in the June quarter, Mumbai Metropolitan Region (MMR), despite being worst hit by Covid-19, had an average price decline of only 0.4 per cent to 0.8 per cent. Credai action committee chairman Ajay Ashar said the body is also seeking realistic ready reckoner rates and also a waiver in earnest monthly instalments for the first two years after buying a flat, and called these as "workable steps" which the government can take to revive sentiment.
The Committee, formed by the developers' apex body, noted that the banks and NBFCs are yet to pass on the benefits of repo rate reduction to the end user and this is a big impediment for both the home buyer and developer. Credai action committee has also suggested to the government to increase the limit of principal deduction on housing loan under Section 80C to Rs 2.5 lakh, raise interest deduction under Section 24 on housing loan for homebuyers to Rs 10 lakhs and scrapping of the capital gains tax for residential properties held for a period of longer than one year to allow them time to reinvest after serious thought. It has also sought a scheme whereby a homebuyer would need to pay only margin money with no EMI for 24 months will address this insecurity.
The committee's joint secretary Shailesh Puranik pointed out that the ready reckoner or circle rates are unrealistic and even more than the prevailing market prices and it has called for its rationalisation.
"These rates are fixed by various state governments to form a basis for levying stamp duty and the reduction will benefit the governments due to the high volumes the consumption will generate," he added. According to ratings agency India Ratings, the overall residential demand would decline over 25 per cent year on year in FY21, after registering a fall office per cent in FY20, due to the ongoing Covid-19 pandemic. It noted that Grade-I residential players continue to generate strong sales due to the ongoing market consolidation.
"Pre-sales for the top 10 listed players grew about seven per cent in FY20 to 32.3 million sqft. However, the sales will be hampered until the ongoing Covid-19 situation stabilises, and thus cash flows for these players could also come under pressure," it noted.