Finance Minister Nirmala Sitharaman will present the Union Budget 2021-22 on February 1. The upcoming budget is going to be challenging as it is the first budget after the coronavirus crisis, which led to a decrease of 23.9% in economic growth. Considering the country’s current economic situation, every sector is waiting with bated breath for this year’s budget. And real estate is no different.
To gauge the current market sentiment, RoofandFloor spoke to some industry stalwarts to understand their expectations from this year’s Union Budget.
Here’s what they feel would make a huge difference.
Increase in tax rebates on home loan
Increase the current Rs 2 Lakh tax rebate on housing loan interest rates under Section 24 of the Income Tax Act to at least Rs 5 Lakh to incentivise homebuyers and generate housing demand.
CREDAI demands that the deduction under Section 80C for principal repayment of housing loan should be increased from the existing limit of Rs 150,000. The deduction for principal repayment of housing loan can be considered for a separate or standalone exemption. This increase in the deduction for principal repayment of housing loan will encourage homebuyers to invest.
“Interest on housing loans should be fully allowed under Income Tax Deduction without any ceiling. The current limit of interest deduction under Section 24 of IT Act 1961 on housing loan of INR 2 lac should be removed to incentivise home buyers and spurring overall demand. Also, loss from house property should be fully allowed to be adjusted against other heads of income. In case of unadjusted loss, it should be fully allowed to be carried forward to subsequent years,” said Rajeev Talwar, Chairman, NAREDCO.
Measures related to GST
GST waiver for under-construction homes: “Even a limited period waiver of GST will reduce overall property cost and thus push demand for under-construction homes, which have been slacking presently. Funds from buyers can aid developers towards project construction and thus lessen their dependence on financial institutions. The most-recent limited-period Stamp Duty cut in Maharashtra significantly boosted demand in both MMR and Pune,” believes Anuj Puri, Chairman, ANAROCK Property Consultants.
The present GST rate on under-construction properties is 5% minus the ITC benefit for premium homes (>Rs 45 Lakh) and 1% for affordable homes (<Rs 45 Lakh).
GST with ITC: Another important demand is to enable the real estate developers to avail input tax credit or ITC on procurement of goods and services. “On the GST front, the demand is for GST with input credit benefitting the industry to sustain its growth momentum,” said Manju Yagnik, Vice-Chairperson of Nahar Group and Senior Vice President, NAREDCO (Maharashtra).
Revision of rates: The government should revisit the GST rates levied on the construction materials especially cement and other raw materials. “In fact, rationalising the GST rates of these commodities will bring down the burden of construction cost and the overall pricing also will be positively impacted,” said Rakesh Reddy, Director, Aparna Constructions & Estates.
Echoing similar views, Ashish R. Puravankara, Managing Director, Puravankara Limited said, “A reduction in the GST on building materials from the current 18% to 5% will be a gamechanger. The move will bring relief to developers, and the benefits can be pass on to the end-user, which will further improve the buyers’ sentiments.”
Tax relief for second homes
Post pandemic, people have realised the importance of larger spaces and self-sustained communities. Hence, the desire to have bigger spaces for the same investments would definitely shift focus from buying properties in cities to second homes in holiday destinations.
Thus, “There is a specific need for income tax relief on a second home which will benefit homebuyers and investors in a big way and also stimulate the real estate sector,” said Lincoln Bennet Rodrigues, Founder and Chairman, Bennet & Bernard Group.
Reduction in holding period of REITs for long-term capital gains
For REITs/InvIT units to qualify as a long-term capital asset, it must be held for 36 months. Reducing the holding period to 12 months as applicable for listed shares will lead to faster adoption of REITs and bring the units held in REITs at par with investment in listed securities.
Ease liquidity
“The government needs to push the well-capitalised NBFC’s to extend liquidity to the real estate developers who availed of the moratorium scheme during the lockdown. Separately well-capitalised NBFC’s and banks should be pushed to extend credit and liquidity to the players in the sector who have good equity left in their stuck projects,” suggests Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory.
“Additionally, the government after the decent success of its SWAMIH fund should announce several more funds that can help target specific real estate verticals that need liquidity support and high capital infusions like township developments and large format business parks,” he added.
Reiterating the same, Anshuman Magazine, Chairman & CEO, India, South East Asia, Middle East & Africa, CBRE, said, “The government could also consider increasing the corpus of SWAMIH fund to provide last-mile funding to residential projects as well as undertake deep restructuring of RE-related loans to smoothen the repayment process such as easing payback of redemption premiums.”
Infrastructure status & single-window clearance
Last but certainly not the least, for several years, infrastructure status and single-window clearance are two of the most wanted demands of the real estate industry.
“It has been a long-standing request by the industry to be granted infrastructure status, which will enable easy access to finances with lower interests for developers, thereby making projects even more affordable to the end-user,” said Ashish.
The streamlining of approvals enforced by RERA and the introduction of the single-window clearance will ensure approvals to be processed more quickly for projects and further result in decreased construction costs, thereby reducing the stress on the developers and homebuyers.
The need for assertive and assistive measures
“The upcoming budget is the most anticipated budget as it is expected to provide the real estate sector with the much-needed recovery and growth impetus. In fact, the industry is looking forward to seeing assertive and assistive measures from the government in the budget,” believes Rakesh.
From massive repo rate cut of 140 bps to a six-month moratorium on EMIs to stamp duty reductions in various states, several measures were announced in 2020 to beat the unprecedented impact of Covid-19 on the overall economy and the real estate industry. But were those measures enough?
Well, “These measures were proactive and commendable – but not surprisingly, given the depth of pain in the real estate sector, they were not enough. The housing industry needs focused measures to further bolster demand in 2021. For this year’s budget, the demands go beyond the usual suspects of single-window clearance and industry status,” concludes Anuj.
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