Growth Engine of Economy Real estate plays a crucial role in the Indian economy. It is the second largest employer after agriculture and is slated to grow at 30% over the next decade. The Indian real estate market size is expected to touch $180 billion by 2020. The housing sector alone contributes to 5-6% of the country’s GDP. Retail, hospitality and commercial real estate are also growing significantly, providing the much-needed infrastructure for India’s growing needs. According to a study by ICRA, the construction industry ranks 3rd among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy. A unit increase in construction expenditure generates five times the income, having a multiplier effect across the board. With backward and forward linkages to over 250 ancillary industries, the positive effects of real estate growth spread far and wide. Truly, real estate is a growth engine for India’s especially Vizag's economy.

CREDAI’s honour roll lists achievements in two broad categories—CREDAI influences and helps rationalize government policy, and it brings together developers to move towards transparency and better practices.

Shaping Policy:

With an impressive track record, CREDAI has evolved into an influential body that helps shape real estate policies for the nation.

The government regularly seeks consultation from CREDAI at several levels and instances. For instance, CREDAI is always invited for discussions before the budget and the organization presents its pre-budget memorandum every which year is taken into consideration by the Ministry of Finance. CREDAI provides a balanced and sensitive feedback from the private real estate industry for all policies under formulation.

Environmental Impact Assessment:

When the Ministry of Environment came out with a notification to enforce environment impact assessment compliance on real estate projects on September 14, 2006, CREDAI represented consistently to the government pointing out the drawbacks in the notification. The EIA Notification required that construction of new projects or activities or the expansion or modernization of existing projects entailing change in process or product mix (for activities listed in the schedule) shall need prior environmental clearance from the central government or the state level Environmental Impact Assessment Authority depending on the project.

Over the past few years, CREDAI has worked constantly to reduce the adverse impacts of the notification on real estate projects. CREDAI’s efforts have gone a long way in changing things for the better. The Ministry proposed an amendment to the notification in January 2009 and the draft for the same has been placed in the official gazette.

Service Tax on Residential Construction:

Owing to the ambiguity and confusion about whether service tax is applicable to the construction of residential complex (as defined under Section 65 {105} of Finance Act), real estate developers across the country were experiencing escalating transaction costs. Coupled with the lack of liquidity in the Indian market due to the credit crisis, this created a grim situation.

After sustained efforts of CREDAI, the government has issued notification no. 9/2009- Service Tax dated March 2009 that supercedes the notification of the Government of India, the Ministry of Finance Department of Revenue, No 4/2004- Service Tax, dated March 31, 2004.

The new notification exempts the taxable services specified in clause (105) of section 65 of the said Finance Act and provides relief to developers. The move also benefits buyers, who will not need to pay the additional service tax amount to the developer when he buys an apartment.

Service Tax on Commercial Rentals:

Another area to cheer for developers and customers alike has been the repeal of the levy of service tax on renting of immovable property for business or commerce. In April 2009, the Delhi High Court struck down the levy as unconstitutional as the renting of immovable property involved the rendering of no service. The levy had come into force in 2007 and saw massive protests across the country, with CREDAI relentlessly pushing for a rational decision.

The judgement has brought great relief to corporate organizations at this time, when several are facing problems lowered profits and liquidity.

Proposed Real Estate Regulation Bill:

CREDAI has actively advocated for the real estate regulation bill over the last year, on grounds that it will help introduce transparency to the real estate industry.

However, CREDAI has also made it clear that the regulatory body should be set up along the lines of SEBI or IRDA so that an extra layer of controls and licensing is not created for the industry, which is already suffering cost escalations and delays owing to the multiple approvals and permits required for real estate project. CREDAI has also suggested that the body should include urban planners, representatives from developers association and members of civil society, in addition to bureaucrats.

Special Residential Zones:

CREDAI has proposed the concept of Special Residential Zones or SRZs (along the lines of SEZs) as a solution to the affordable housing crisis.

Skill Development Initiative:

CREDAI took initiatives over the last year for a thorough interaction among the BoD members within NSDC. Four BoD meetings have already taken place and a number of changes have taken place and stress is being laid on public private partnership (PPP) model to achieve the skills development mission.

Urban Land Ceiling:

CREDAI worked for the abolishment of urban land ceiling and even the last remaining bastions of ULCRA have now abolished it.

Stamp Duty Rationalisation:

CREDAI suggested that the stamp duty be brought down and several state governments have brought down the duty

Real Estate Financing:

In 2000, CREDAI supported the introduction of the concept of REITS. The concept is now well accepted in India in the form of real estate mutual funds.

CREDAI representatives had met with the Chairman of the Indian Banking Association (IBA) over the lack of funds for the real estate projects. A fresh infusion of funds is needed for real estate developers to complete ongoing projects and get the industry back on track.

CREDAI has submitted a proposal addressing several issues, including the track record of developers, their fiscal practices and loan repaying capacity. CREDAI is pushing for provisions that allow term loans to be rescheduled as well as rollover of existing loans allowed for construction loans. Also, CREDAI has requested for margin money contribution by home loan buyers to remain at 15% instead of the present 30%.

CREDAI is also in talks with the government to accord priority status to housing sector and to help remove the disparity in risk weights so that real estate gets easier access to bank loans.

Other Policy Reforms:

CREDAI was instrumental in drafting the National Housing Policy in 1998. In 2007, seeing that the real estate scenario had changed to include retail, hospitality, sports complexes, convention centres and a lot more, CREDAI suggested that the National Housing Policy be redefined to become the National Real Estate Policy. This has taken the form of the National Housing and Habitat Policy

Reforms suggested by CREDAI in urban development (put forward in a workshop) have now become part of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), a Government of India initiative aimed at encouraging reforms and fast track planned development of identified cities.

CREDAI has also suggested that the states be given incentives to adopt the Urban Reforms Incentives Fund (URIF) and the Urban (ULF)

Other Suggestions to the Government:

Some other areas where CREDAI is actively engaged in dialogue with the government are:

  • Encourage affordable housing
  • Increase investment in housing construction, maybe through changed ECB and FDI
  • Facilitate land availability
  • Stimulate housing demand by permitting foreign ownership, giving incentives to buy homes