Meet with real estate players to resolve their woes, Goyal urges to banks

Finance Minister Piyush Goyal has asked banks to hold a meeting with real estate players within the next fortnight and come out with "innovative ways" to resolve the funding crunch faced by the real estate sector. He also asked them to expedite loan approvals for real estate projects, saying the process should not take months.

"Everybody started with a good project, over a period of time some of them run into difficulty... In next 15 days you must have a dialogue with them, if possible within 7 days. Involve private sector banks because they have more flexibility than PSU banks... Let all the bankers hear them. There is a real problem and we have to find innovative ways... We will have to differentiate grain from the shaft," Goyal said. Asking banks to assess real estate projects on a fast track basis, the minister said: "You cannot have 6-8 months to assess each projects. Half the projects will become sick because of that, if there are genuine reasons that have happened, we need to look at some innovative ways to address that".

Speaking at the Credai conference here, Goyal asked banks to differentiate between businesses trying to misuse the system and the genuine developers. "And if you find somebody has layered too many projects, somebody does not have enough equity, take him to the cleaner zone... Let us find a solution, so that we can kickstart affordable housing, kickstart businesses which are genuine, and wherever you find that somebody has cheated the system just separate them, without adversely impacting the entire sector," he added.

Referring to issues concerning Goods and Services Tax in the realty sector, he said GST Council will meet soon to take a view on the lower rate slabs being proposed by a 7-member panel of the state finance ministers. "I hope you will like the final consensus of the Group of Ministers," Goyal said.

The GoM, in its meeting last week, favoured lowering GST on under-construction residential properties to 5 per cent, from 12 per cent currently, besides slashing taxes on affordable housing to 3 per cent from 8 per cent. However, ITC benefits would not be available to the real estate players. Currently, GST is levied at 12 per cent with input tax credit (ITC) on payments made for under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale.

"My request to you is to accept the new rates which would be decided by the Council. It is in your benefit also because people will not pester you for small, small issues like whether ITC benefits has been passed or not, trouble you with anti-profiteering measures," Goyal said. The effective pre-GST tax incidence on such housing property was 15-18 per cent.

GST, however, is not levied on buyers of real estate properties for which completion certificate has been issued at the time of sale. There have been complaints that builders are not passing on the ITC benefit to consumers by way of reduction in the price of the property after the GST rollout, following which the GST Council had set up a ministerial panel to suggest ways to boost realty sector.