Nirmala Sitharaman, the finance minister of India is all set to present the Union Budget for the financial year 2022-23 on 1st February. The government is likely to focus on infrastructure and asset monetisation in the Union Budget. The general expectation is that this budget will incentivise both the rental housing market and the affordable housing sector. Another measure that will help the recovery of the sector is a GST waiver on under-construction projects and raw materials like cement, etc.
The industry experts share insights about their expectations from the union budget 2022.
Mr. Nitin Kansal, CFO, Max Estates Ltd.
We would hope that the upcoming union budget would act as an enabler by accepting the long-standing demand of the commercial real estate sector to receive an input tax credit on GST collected from customers on rentals for built-to-lease properties. This shift would not only boost the CRE business, but would also prove beneficial for various other businesses like retail, hospitality & hotels, malls etc.
From a residential real estate lens, a few key relaxations like an increase in tax rebates on interest on housing loans and serious relook of the definition of ‘affordable’ both from the value of the house as well as its size will provide a much-needed boost to the sector. Another area that the union budget should look at is policies that will help soften the prices of input costs to aid further improvement of the affordability index.
The real estate sector is the second-highest employment generator in India. The industry is expected to reach a market size of $1 trillion by 2030, while contributing around 13% to the GDP of the economy by 2025. These positive changes in policies will provide a boost to the sector and enable strong developers to create quality spaces and value for the economy.
Mr. R K Arora, Chairman, Supertech Ltd
The recent debt crisis in some of the large NBFCs has hurt the real estate sector, which was already grappling with a liquidity crunch. The government has been proactive in resolving the issues pertaining to different segments of the economy, including the real estate sector.
However, the liquidity crunch is a serious problem for the realtors, especially the smaller developers. We urge Finance Minister Nirmala Sitharaman to help in mitigating the funding issues for the sector. Giving ‘industry status’ to the real estate sector could be a small step in this direction. Last mile funding is also required to complete the ongoing projects, so the government should also issue guidelines to existing lenders directing them to provide last mile funding.
For the home buyers, the government should increase the tax incentives on home loans. Amid the scare of this fast spreading Omicron, any additional fiscal incentive to the first-time homebuyers will go a long way in further boosting the demand which has started looking up.
Mr. Saransh Trehan, Managing Director, Trehan Group
The government should come out with measures to incentivise developers for building townships in smaller towns and cities. Well planned townships will go a long way in improving the standard of people in such areas.
The definition of affordable housing needs to be changed as it is nearly impossible to own a decent apartment under Rs 45 lakh in major cities. The Rs 45 lakh ceiling needs to be enhanced significantly to ensure housing-for-all a reality in a shorter time.
Suren Goyal, Partner, RPS Group
The current ceiling of Rs 45 lakh for classifying as affordable housing needs to be looked into. It should be enhanced to Rs 75 lakh at least. Also, the building raw material cost has gone up significantly in the last few years, particularly since the Covid outbreak. The Hon’ble Finance Minister needs to announce some measures to cool off raw material prices and lowering taxation on these should be considered in the upcoming budget, at least in the short run.
In the last Union Budget, the government did provide incentives for affordable and rental housing by extending the additional deduction of Rs 1.5 lakh for loans taken by March 2022. We are expecting the government to extend the scheme and enhance the additional deduction of Rs 2.5 lakh as it will provide a further fillip to the affordable as well as mid housing segment.
Mr. Amit Goyal, CEO, India Sotheby’s International Realty
Right at the top of the industry’s wishlist has been the enhancement of the income tax deduction limit against home loans. The current deduction limit of Rs. 2 lakh per annum has remained unchanged for several years. We hope Finance Minister Nirmala Sitharaman will accept this demand and raise the tax offset on home loan interest to at least Rs 5 lakh. This single move has the potential to boost India’s housing market and, in turn, accelerate economic growth.
Also, the difference of more than 10% between the circle rates and agreement values of properties translates into tax penalties under Section 43CA of the Income Tax Act. The government must appreciate that the difference between the circle rate and actual price is much higher in certain areas of Delhi and other parts of the country. Hence, the government should consider extending the relief to up to 20% of the difference.
The other pain point is the applicable tax deducted at source (TDS) on property transactions for NRIs. IT is way too high and should be reduced from the current 28.49%, as the refund process still takes significantly longer.
Kanika Gupta Shori, Founder and COO, Square Yards
The real estate sector is upbeat about the Budget 2022 and expects that a good hand holding from the government can put the industry on a strong footing in the coming months. Property stakeholders want the standard Rs 2 lakh tax deduction on interest paid on home loans to be increased to Rs 5 lakhs as it will bring more salaried people in the bracket and help them realize their dream of buying a home. This decision will also keep the housing demand healthy and help property developers recover from the losses and increase their wafer-thin profit margins. With prices of raw materials hitting the roof, property developers want a GST waiver or reduction on construction materials. The long-standing demand of awarding industry status to the real estate sector is also expected from this budget. Lastly, there should be a stay on stamp duty deductions in tier 1 and tier 2 cities as it will push more homebuyers towards home ownership and help developers offload pending inventory.
Ajay Sharma, Managing Director, Valuation Services, Colliers India
“Real estate sector witnessed a period of recovery which is likely to be derailed by the current pandemic wave. Given that the inflation-related risks are likely to shape the monetary policy of the central bank, an increase in US federal bank rates will accentuate the cash outflow from markets and that the period of statutory concessions extended to both buyers, developers and other stakeholders in the market will lapse, the immediate focus will be on how to ensure any resultant shock will be cushioned through fiscal measures thereby providing more cash in hand for all stakeholders. This should be led by extending the tax concessionary benefits pertaining to affordable housing, increasing tax set-off for housing loan interest payment under sections 24, 80EE and specifically increasing the standard deduction which could increase the cash available through savings for taxpayers. These combined with more specific curative measures like long-term capital gains period be reduced for REITs and increase the total deduction available under 80C where the home loan principal repayment deduction is allowed, will increase investment into real estate. Apart from these, the budget should focus on bringing all housing segments under one single GST slab while extending additional benefits to affordable housing to the buyers through tax concessions thereby sustaining the momentum for affordable housing and at the same time increasing growth of other housing segments through GST relief to developers. Though not directly related, the Budget should relook at the capital gains taxation of the profits arising from the transfer of shares (held as an investment) in entities holding immovable assets especially in M&A where sick units with assets are being taken over either from insolvency or SARFESI based resolutions. This could free capital for entities in real estate business which could be reinvested for newer ventures and promote the growth of the sector”