The Hindu Business Line : Plea for changes in FDI guidelines in real estate

INDIA Inc on Monday petitioned the Ministries of Finance and Urban Employment and Poverty Alleviation not to levy further taxes on the real estate sector as this would "derail" it and "muzzle its growth-inducing impulses".

The Federation of Indian Chambers of Commerce and Industry (FICCI) pointed out that the real estate sector was already overburdened with taxes.

It, instead, recommended amendments to the FDI guidelines in townships, housing, built-up infrastructure and construction projects, implementation of uniform VAT across States, abolition of service tax on the construction industry — especially the housing sector — and reduction of stamp duty.

The FICCI noted that the real estate industry has significant linkages with other sectors of the economy including 250 associated industries and is the second largest employer.

According to the chamber, one rupee invested in this sector results in 78 paise being added to the GDP of the State.

It argued that the FDI should be permitted in real estate development companies.

According to a PHDCCI study on the sector released today, the construction industry is expected to grow by 7-8 per cent annually and would be worth $180 billion by 2020 from its present size of $50 billion.

Driven by an emphasis on infrastructure development in the country, the study says that this is the ideal time for the sector to "propel the national economy on a higher growth trajectory".

The construction industry, it says, has the capacity to absorb changes and attract international capital in developing large infrastructure projects.

Though it is presently fragmented with few companies operating, it still constitutes 40-50 per cent of the national capital expenditure on projects such as energy, irrigation and transportation and urban infrastructure.

The study points out that by aligning itself to global partners, the industry would be able to make use of advantages such as cut in R&D costs, access to complimentary technology, shortening of product development cycle and larger entry into foreign markets.

The study also suggests that the sector's growth be facilitated by the Government outsourcing construction jobs to the private sector and providing fiscal concessions, including tax holidays.

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