Stimulus can put realty back on track
It’s boom time for Hyd real estate as KCR govt doing excellent job, says NAR’s Varma
What are the key challenges that realtors or real estate brokers are currently facing in India?
Among the key challenges we face is the unreasonable amount of GST that we are forced to pay on our fee or commission. At present, GST on brokerage charges is 18 per cent, which is very high and equal to nearly one-fifth of our commission.
High GST is grossly unfair. So, nobody including developers, wants to pay it. We are being asked to either include in our fee or take in cash to avoid GST payment. If we include the tax in our commission, we will straightaway lose 18 per cent income.
Further, we don't want to take cash as it leads to unaccounted money which goes against the policies initiated by Prime Minister Narendra Modi to eliminate black money. PM wants cashless society and we are committed to it.
What is the reasonable GST you people can pay?
Ideally, 5 per cent GST on brokerage is reasonable. We are okay with that. It is the worldwide experience that taxes are considered fair if payee thinks they are fair.
Further, compliance is highest when tax is reasonable. People tend to avoid tax if it is on higher side.
However, there may not be strong resistance if the government reduces GST to 12 per cent, at least. But 18 per cent is too high. In some markets, the exorbitant tax is driving growth of unaccounted or black money.
What about RERA registration? You seem to have some issue with it.
Apart from GST, the other area of immense concern for us is RERA. Under current RERA framework, brokers are required to get registered and pay fee in every state where they operate.
What we want is 'one nation one registration'. The RERA Act should be amended to include single registration for entire country. This will not only allow realtors to operate in multiple states with single registration, but also reduces fee burden on us.
Further, we want reasonable registration fee. A lawyer can practice his profession by paying Rs 1,000 a year while chartered accountants shells out mere Rs 1,700 a year.
Then why should realtor be forced to pay Rs 10,000 to Rs 2 lakh for practicing his real estate brokerage? On one side, the government says it wants to create jobs. On the other hand, it levies high registration charges for realtors. Real estate is the easiest profession to be in.
However, government should mandate minimum qualification for realtors for registration under RERA.
The Narendra Modi government has been trying to eliminate black money from real estate. How far the government has succeeded?
On this aspect, the government is more successful in West and South India. In North, there is still some element of black money in real estate transactions.
Further, some element of black money is there in land transactions, but it is coming down. As farmers enjoy tax-free status, they have no objection if they are paid through cheque for their lands.
As you are aware, real estate sector has been going through tough times across the country, barring Bengaluru and Hyderabad. When do you think this key sector will be back on growth track?
The sector is doing well in Gurugram, some pockets of Kolkata, Hyderabad and Bengaluru. There are several reasons for the sector not doing well in other areas. Post demonetisation, builders are dependent on banks to execute projects.
Banks stopped funding realty projects. So are also NBFCs. Secondly, property prices have risen too high. Therefore, a correction has to take place. However, affordable and luxury housing have not suffered. I think Finance Minister will soon come out with a stimulus for the sector.
We expect her to initiate measures to see that stalled realty projects are completed. The recovery in realty sector, which accounts for 18 per cent of GDP, will depend on these measures.
The sector will be back on growth track in six months if govt offers right stimulus.
What is your take on Hyderabad real estate?
Hyderabad realty is booming. IT is still booming, so is also the realty here. I see all good things happening in Hyderabad. KCR government is doing a good job. Governance is good here.
CM is genuinely interested in promoting and developing Hyderabad. The realty boom will continue here so long as policies are good.
The government is investing a lot on infrastructure. Our experience is that good infrastructure generates good business in realty space.