Atul Banshal, a distinguished chartered accountant with over 28 years of experience, has spent the last 17 years at the helm of finance for leading real estate firms. As the Director of Finance at Omaxe Limited, he plays a pivotal role in steering a prominent listed real estate group that has delivered an impressive 135 million sq. ft. of space across 29 Indian cities. Beyond this, Banshal is a key figure as a Governing Council member of BRICS CCI and leads the Real Estate CFO Group. His extensive expertise encompasses real estate, derivatives, both domestic and international structures, M&A, equity and debt financing, and strategic partnerships with major financial institutions and banks.
In an exclusive conversation with The Interview World, Atul Banshal offers an in-depth analysis of the real estate sector’s anticipated reforms and incentives. He explores tax reforms, liquidity challenges, sustainability practices, regulatory transparency, ease of doing business, and potential changes to RERA in light of the Union Budget 2024. Dive into the crucial insights from his conversation.
Q: What are your primary expectations from Budget 2024 in terms of reforms and incentives for the real estate sector?
A: First and foremost, the real estate sector must be granted industry status. This sector is the powerhouse driving India’s GDP, the foremost job creator, and the ultimate wealth generator for the nation. Officially recognizing real estate as an industry will unlock a treasure trove of benefits and vital incentives, propelling growth, expansion, and a surge in job opportunities. Such a move will also empower the sector to provide more households to individuals, fulfilling a fundamental need.
Furthermore, families investing in real estate pour their hard-earned money into what is often a once-in-a-lifetime investment, yet they receive minimal tax benefits. Buying a home typically demands cutting back on other expenses, representing a significant financial commitment. By offering substantial tax incentives, we can ease this burden, allowing families to save more, reinvest in the real estate market, and contribute to the nation’s economic growth.
Lastly, in alignment with Prime Minister Modi’s ambitious vision of ‘Housing for All,’ it is crucial to reintroduce incentives like Section 80 IBA, which previously provided significant benefits for smaller homes. These measures will not only support the creation of affordable housing but also stimulate broader economic development, ensuring that every Indian has a place to call home.
Q: What specific tax reforms or incentives would you like to see introduced or continued to boost the real estate sector?
A: Implementing specific tax reforms and incentives can catalyze a significant surge in the real estate sector. A crucial step is the reintroduction of Section 80 IBA, which previously offered tax benefits for small houses built in tier-one, tier-two, and tier-three cities. This provision would spark a wave of development, urging builders to create these much-needed homes. Our demographic reality, with 80% of the population being middle class or below, underscores the urgent demand for affordable, smaller homes.
However, constructing these homes demands substantial resources and offers slim profit margins. Without tax incentives, builders are reluctant to engage in such projects. Reintroducing Section 80 IBA would ignite a construction boom, aligning with the existing market demand. These homes would sell rapidly, driving immediate benefits to the real estate sector.
Additionally, the current housing loan interest deduction cap is outdated and insufficient. The deduction limit, set at ₹2 lakh per individual, has remained stagnant for over a decade. This limit fails to meet the financial realities of today’s homebuyers. Raising the deduction cap to at least ₹5 lakh would transform the landscape of homeownership, making it more accessible and affordable for a broader segment of the population.
This increase would incentivize more people to invest in homes for personal use, infusing fresh momentum into the real estate market. By enacting these tax reforms, the government can stimulate a robust housing market, propel economic growth, and address the pressing housing needs of the middle and lower-income population segments with precision and impact.
Q: In what ways can the Budget address the challenges of liquidity and financing faced by real estate developers?
A: Liquidity and financing are pivotal challenges that plague every real estate developer. The upcoming budget has the power to tackle these issues head-on. Imagine if banks could offer builders funding at rates as attractive as those given to the manufacturing sector or other industries. Such a shift would be transformative.
Right now, RBI regulations compel banks to set aside hefty provisions for loans to real estate developers—far more than they do for other industries. But what if we could change that? Elevating the real estate sector to industry status could relax these stringent provisions, making financing as accessible and affordable as it is for other sectors.
High financing costs are inevitably passed down to consumers, driving up property prices. Lowering these costs would ease the financial burden on buyers and make homes more affordable. Moreover, this adjustment would ripple through the economy, fostering investment and growth and bolstering economic stability. It’s a win-win scenario that benefits both consumers and the broader economic landscape.
Q: How can the Budget promote sustainable and green building practices within the real estate industry?
A: Real estate is not merely a long-term investment; it’s a monumental commitment to shaping the future. The structures we build today are not just concrete and steel—they are legacies that will endure and influence our environment for generations. That’s why our approach to development must prioritize sustainability and environmental stewardship. We need to champion green buildings and slash carbon footprints, understanding that our present choices are the blueprint for tomorrow.
To drive this transformation, the real estate industry needs powerful incentives. Energy conservation is not a mere option; it’s imperative given our current environmental crises and future projections. We must construct buildings that are energy-efficient and environmentally friendly. The government’s role here is critical—it must enact reforms and impose regulations that mandate meaningful environmental contributions from all new constructions.
One key strategy is to embed substantial incentives in the budget for developers who commit to green building practices. Financial perks like subsidies or tax breaks can be game-changers. They not only alleviate the initial costs of green construction but also spark widespread industry commitment to sustainability. Each stride towards energy conservation enriches national resources and strengthens our environmental defenses. This underscores the necessity for the budget to actively support these initiatives.
At present, some state regulatory bodies offer limited incentives, such as additional built area, to developers who embrace green building. While these incentives are a step in the right direction, they are insufficient on their own. We need a more cohesive national strategy. Implementing policies that offer lower loan rates or faster approval processes for sustainable buildings could catalyze broader industry engagement. These reforms would create a robust framework supporting green practices and promote widespread adoption.
A successful transition to sustainable real estate demands a collaborative effort between the government and the private sector. The government must provide substantial subsidies and incentives to drive developers towards sustainability. Meanwhile, developers must seize these opportunities and integrate green practices into their projects. If they fail to do so, regulatory measures, including restrictions on approvals and building permissions, should be enforced to ensure compliance.
In conclusion, making our real estate sector sustainable is not just an obligation—it’s a strategic imperative. By implementing decisive policies and fostering a collaborative approach, we can drive profound improvements in energy efficiency and environmental impact. This is our chance to build a legacy that positively shapes the world we leave for future generations.
Q: What measures would you suggest for improving regulatory transparency and ease of doing business in the real estate sector?
A: In today’s tightly regulated landscape, adherence to rules is non-negotiable for upholding discipline and accountability. But let’s be honest: while regulations are crucial, they’re only as effective as the transparency that surrounds them. Without it, you’re left with a tangled mess of red tape where no one knows what’s what.
Take the current scenario: developers are shackled by over 150 regulations per project. Many of these regulations are relics from a bygone era, and navigating them is no small feat. Yet, while developers are scrutinized for compliance, regulatory authorities are largely unchecked in their approval timelines and consistency. This lack of oversight creates a black hole in transparency, causing unnecessary delays and inefficiencies.
The answer? A single-window clearance system. Imagine cutting through the bureaucratic jungle with one streamlined platform. This approach would dismantle the labyrinth of approvals, accelerating project completion and cutting down delays. Developers would benefit from swifter approvals, while customers would get their homes on time—an absolute game-changer in a sector plagued by sluggish progress.
But let’s not stop there. Harmonizing regulations is equally critical. Fire safety codes, environmental standards, and building bylaws need to work in harmony, not at odds. An integrated system where all regulations are aligned and managed centrally would not only simplify compliance but also ensure that every regulation supports, rather than hinders, the others.
Envision a system where approvals are centralized and regulations are synchronized. Such a framework would streamline processes, benefit developers with faster turnaround times, and deliver homes to customers without delay. Plus, prompt project completions would mean tax revenues and other benefits flow smoothly to the government, fueling economic growth and stability. This is not just about efficiency; it’s about creating a system that works in unison for everyone involved.
Q: What are your thoughts on potential changes to the Real Estate (Regulation and Development) Act (RERA) in the context of the Budget?
A: RERA (Real Estate Regulatory Authority) marks a transformative milestone for the real estate sector in India. It has introduced a structured regulatory framework that addresses many of the previous shortcomings in the development process. Prior to RERA, the real estate sector lacked stringent oversight, leading to frequent delays and a lack of transparency. By regulating the entire development process, RERA has introduced a level of discipline that benefits developers, as it mandates adherence to clear guidelines, ensuring a more streamlined and transparent development cycle. This, in turn, fosters greater confidence among buyers and investors, as they can now expect a higher degree of reliability in project delivery.
Despite these significant improvements, there remains a notable gap in the current RERA framework. Presently, RERA’s scope is limited to developers, leaving out approving authorities and customers. Approving authorities play a critical role in the real estate sector by defining project timelines, overseeing the approval process, and ensuring compliance with various regulations. Their exclusion from RERA undermines the Act’s effectiveness because their delays and inefficiencies can significantly impact project timelines and quality. Incorporating these authorities into RERA’s framework would ensure that all parties involved in real estate development are subject to the same rigorous standards, thereby enhancing overall project management and execution.
Additionally, the current regulatory structure allows customers considerable flexibility, including the ability to book and cancel properties with minimal financial repercussions. This leniency can lead to speculative behavior, where customers invest in properties to withdraw if market conditions are favorable. Such practices distort the real estate market, create instability, and are contrary to the original intent of RERA, which aims to foster a fair and transparent market environment.
To address these issues effectively, it is crucial to extend RERA’s regulatory reach to all stakeholders involved in the real estate sector. This includes not only developers and approving authorities but also customers. By implementing regulations that govern customer behavior—ensuring that investments are genuine and transactions are completed without unnecessary withdrawals—RERA can further stabilize the market and reduce speculative activities.
In conclusion, for RERA to achieve its full potential and create a more robust and reliable real estate industry, it must encompass all key participants. By doing so, it will foster a more transparent, disciplined, and stable market environment, ultimately benefiting developers, consumers, and the real estate sector as a whole. This holistic approach will reinforce RERA’s objectives and contribute to a more efficient and trustworthy real estate industry in India.
