PRE BUDGET : REAL ESTATE WISHLIST
India is a domestic demand–driven economy and a consumption-led growth is an expectation from the upcoming budget. However, the challenge facing the government will be enhancing production and curbing inflation in the face of high crude oil prices, supply chain disruption and shortage of raw materials. As per report by Deloitte India, the government would like to build its capacity to respond to future adversities in case they arise. It would like to have the flexibility to use fiscal policy to support the economy without triggering financial imbalance and fear among investors. According to KPMG on the fiscal front, the government’s ability to further pump-prime the economy will hinge on its capacity to find additional revenue sources, while balancing its expenses. To gauge the market sentiments and better understand the expectations from Union Budget 2022, Grant Thornton Bharat conducted a pre-budget real estate and infrastructure sector survey. The survey results convey an expectation of government intervention via concessions and incentives in several key areas of the real estate industry such as incentives aimed at rental housing, co-working spaces and concessions to achieve housing-for-all. A whooping expectation across the sector, is for an increase in the limit for tax exemption on housing loan interests to boost the consumption, considering the average ticket size of the loans in urban and corresponding areas have higher annual interest. For real estate, the fiscal incentives & waivers expectations as summarized by Radha Dhir, CEO & Country Head, India, JLL include, Increased allocation for SWAMIH fund, 'Industry status' to the real estate sector, 100% FDI in completed residential real estate projects through the automatic route Separate provision for deduction of 'principal repayment' on home loans up to INR 2 lakh, Removal of restriction on setting off the loss from house property against other heads of income, Increased limit on interest deduction under section 24(B) for tax rebate, Extension of benefit u/s 80EEA to avail additional INR 150,000 interest deduction on home loans for first-time homebuyers, Tax deduction on profits from affordable housing projects to be extended until March 2024 u/s 80IBA and Extension of Credit Linked Subsidy Scheme (CLSS) She also mentions Fiscal incentives for net-zero buildings, Special tax status for data centre parks, Reduction in holding period of REITs for long-term capital gains, Allowing input tax credit on the calculation of GST payable in real estate, A special authority for monetisation of surplus land by Government companies / public sector enterprises According to Amit Goenka, MD & CEO, Nisus Finance, it is expected that Budget 2022 will be in favour of real estate. “There will be some relaxations in taxes and some waiver on GSTs on the materials. Real Estate is one important aspect to build up the economy of India contributing around 8% of GDP. Major developers and real estate players are looking forward for positive support from the government. Slow economic and hugely affected by the pandemic and stagnant prices of the property, real estate developers are hoping for a fortune from this year's budget,” he said. Ashish Joshi, Founder & CEO, Landmark Capital shared the steps required, “To increase demand and investments into real estate sector, deduction on principal repayment of home loans u/s 80C should be increased. Increase in tax set-off amount on interest on housing loan from existing 2 lakhs to 4 lakhs, will help boost demand especially in the affordable housing categories. Furthermore, for the first-time homebuyers in affordable segment, government should extend the benefit of additional interest deduction on home loans. Currently the exemption is only till March 2022. LTCG on sale of house property should be taxed at reduced rate of 10%. To attract foreign investors, tax on interest income should be reduced, this will help accelerate capital inflows to India. From GST perspective, we expect waiver on GST rates for under construction properties, to enable private investments. Introduction of Input Tax Credit for developers, reduction in stamp duty rates which were carried on by few states earlier, will make sizeable difference in the cost of the project, and boost the consumption in this sector. To counter the increasing prices of raw materials like cement steel etc, waivers or reductions should be provided on GST on raw materials. Such steps can help the developers to take on new projects and help build sustained liquidity in the industry overall.” AFFORDABLE HOUSING Amit Goenka believes redefining of ‘affordable housing’ will be a boost for housing segment in metro cities. “Millennial are loving the idea of owning their own house during this difficult time where they are majorly working from home. Every builder is coming up with smart ideas to create a housing which is easily accessible.” Ashish Joshi too agreed that limits on affordable housing needs to be redefined upwards from existing value of 45 lakhs and carpet area of 60 sq meter or below, to expand the benefit for homebuyers and boost the demand. “We are expecting that the budget will reward the infrastructure status to the realty sector overall, bringing in multiple tax incentives to boost foreign and local investments and will help in building liquidity in the sector," he stated. There is an optimism that the government is likely to provide sops for the affordable housing sector and its flagship scheme PMAY including 15-20 per cent higher fiscal support. EASE OF DOING BUSINESS Ashish Joshi expects the government to introduce long awaited Single-window clearance in the upcoming budget. “Delays in project approvals continue to be roadblock for developers, the single-window clearance will help fast-track the construction and delivery process. Digitalization of land records and model tenancy act will go a long way in enhancing ease of doing business. However, along with the expectations from budget, the expected rate hikes from the RBI would be a major point to watch out for, as it may impact the liquidity in the markets.” As per Amit Goenka, although the growth in sales is increasing due to various factors including low rate of interest, affordable housing schemes, better infrastructure etc, the single-window clearance will help fast-track the construction and delivery process. “Apart from the single window clearance tax relief expected to extend to the home buyers by raising the tax deduction limit from 2lakhs to 5lakhs this encourages new home buyers. There is sudden growth in the 2-3tier cities, as they have emerged as major contributors in supporting the sector.” GOVERNMENT MEASURES TO SUPPORT REAL ESTATE Amit Goenka shared some of the government schemes that are making a difference: “For providing and strengthening the position of developers, the private sector should be allowed more to participate in the financial system. It will allow the capital to flow smoothly and real estate will evolve in a better way,” concluded Amit Goenka “Unsold inventory and stalled projects are the major concerns for the sector. To help in completion of stalled projects, the corpus of SWAMIH stress funds backed by the government should be increased from existing 25000 crore, to 1 lakh crore. Also, government should announce more funds that can help target specific real estate verticals that need liquidity support and capital infusion,” suggested Ashish Joshi Although, the Indian economy is severely affected with the current on-going pandemic situation and real estate is hugely affected with it. The government of India has collaborated with several states to promote the growth and development in the real estate industry.
Tags : Union Budget 2022 Radha Dhir CEO & Country Head India JLL Amit Goenka MD & CEO Nisus Finance Ashish Joshi Founder & CEO Landmark Capital National Housing Bank (NHB) REAL ESTATE WISHLIST