Tyagi feels the government should come out with more clarity on the double taxation of REITs. "As far as Real Estate Investment Trusts (REIT) are concerned Sebi has put the basic ground rules out there but now the taxation aspect of REIT need to be addressed for them to become reality," he said.
Also Read: REITs, GST, easier FDI norms top realty's Budget wishlist
He thinks the government should address some old issues pertaining to special economic zones (SEZ) like the longstanding demand to abolish dividend distribution tax (DDT) and minimum alternate tax (MAT).
He also feels that hiking the exemption limit on housing loan may help kick start demand.
Below is the transcript of Ashok Tyagi's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: Is the Budget the place to expect anything on the real estate sector, are you going with any concrete tax expectations?
A: There are three or four set of expectations that one has from the government's policy framework whether they address in their Budget or in subsequent notifications or in the following Budget, is not for me to say. As far as Real Estate Investment Trust (REIT) are concerned Sebi has put the basic ground rules out there but now the taxation aspect of REIT need to be addressed for them to become reality. Therefore, that's one thing which does need to be addressed by the government. This Budget, next Budget, policy notification in between is for them to decide.
There are some issues pertaining to special economic zones (SEZs), the old demand of dividend distribution tax (DDT) and minimum alternate tax (MAT) abolished in SEZ, which has been a long standing demand of SEZ industry. However, from kick starting demand, this entire thing of enhancing the exemption limit for interest on housing loans, this limits now been there for eight or ten years, so this limit does need to get inflation index if nothing else. Then of course there are other demands like granting the industry, infrastructure status so that the ease of credit especially to the medium size developers eases. So, those are some of the basic steps that do need to be addressed some time.
Sonia: If we do get some clarity on this double taxation on REIT, if double taxation is removed. What kind of a benefit if you could quantify for us, could be for a company like DLF?
A: Instead of quantification the way I look at it is that it opens a new market for both investors and the developers if the double taxation issue is resolved. On the debt side as an example for the rent yielding assets, we over the last couple of months have launched the commercial mortgage backed security which has opened up new instrument on the debt front. Similarly REIT would be an absolutely new instrument on the equity front which should hopefully attract a lot of foreign institutional investors (FII) investment as well and that does open up new avenues for capital as well as a new regime for returns from investor standpoint. So, it will be very good.
I do not want to quantify as to how much quantum we would raise from the REIT and those things because those are still details to be worked out.
Latha: Coming to your own company while you made good all your promises or most of your promises on the debt reduction front. Sales were a bit of a disappointment. Can you tell us if things are turning around at all, your expectations on the sales front for this year?
A: I would acknowledge that the sales were a disappointment everybody is expecting sales story to turnaround, the way we look at it is there has been an increase in the enquiries or in the interest but in terms of hard turnaround on the sales numbers, we maybe still a quarter or two away. One is hoping that the Budget provide some concrete steps which lead to that turnaround. There is some stability on the interest rate regime and those issues should come together to reverse the sentiment on the sales side. The sales story has to reverse, it is only a question of does it reverses in Q2 or Q3 but the entire trend seems to suggest that the story should reverse.
Sonia: I have one follow-up to the point you made earlier about kick starting demand and the fact that one would like to see enhancing of the exemption limit on the interest on house loan but given the fact that this finance minister has clearly said that tax sops maybe difficult to come through, in fact we are looking at the fiscal deficit situation very closely. Do you think that this is just a wish list and it may not actually come through, enhancing of the exemption limit?
A: That is a tradeoff that the government has to do. The only thing which the policymakers should not lose sight of is that a jumpstart to the real estate and housing sector normally has a significant multiply effect even on the other sectors of the economy; downstream sectors like cement, steel and all of those things. I think it has a huge multiplicative factor. While you are right that there could be some tradeoff on the fiscal front, I think they should take a holistic view of this.
Latha: Any fresh debt reduction targets for the current year, anything that you are looking to selloff and more importantly since the equity markets are very kind at this point in time, would you want to use that situation to improve your debt equity ratio in some fashion, basically, will you raise equity?
A: On the first question first, as we said in our commentary on our annual results also is that this debt level of Rs 18,000 crore odd is a level which we believe we can live with comfortably at least for the medium-term till the operating cash flows fundamentally reverse. However, we also issued the caution that in the coming couple of quarters it is possible that because of sustained weakness on the operating front, there could be some deficit especially with regard to meeting our capex and any contiguous land acquisition need that we may have. We will continue doing smaller divestitures to ensure that the net debt level does not move significantly of this median of Rs 18,000 crore odd.
On the second issue, on equity; obviously that is a more medium-term capital action standpoint and right now it's too speculative for me if I comment on that.
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