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All Eyes On Budget

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The middle class once again is hoping for some sops and concession especially for taxand GST deductions in the forth- coming budget of the new government. The rising inflation and stagnant incomes have become the constant struggle for common man and any relief to ease the bur- den of increasing expenses will be welcomed wholeheartedly.

Income Tax Payers Wish List Few of their pre-budget expec- tations include improvements in tax slabs, increasing the standard deduction from salary from present Rs 50,000 to INR 1,00,000, more relief under Section 80C covering life insurance premiums, tuition fees, principal repayment of home loans and in terms of medical benefits increase in Section 80D limit from Rs 25,000 to Rs 50,000 for individuals and from Rs 50,000 to at least Rs 75,000 for senior citizens. With ris- ing cost of living, people also look forward to revisions of limits under Section 80E (interest on education loan), 80EE (interest on housing loan), 80G (donation), 80GG (rent, where a person does not receive HRA) and 80TTA/ 80TTB (savings bank/ fixed deposit interest).

What Do Homebuyers Want

After the Interim Budget damp- ener, the homebuyers wish list once again revolves around the increase in the limit on tax deduction on interest paid on home loans under Section 24 (b) and reintroducing tax exemptions for first-time homebuyers. Also, re-in- troduction of subvention schemes will be favorable for home buyers, in the absence of which, they have to pay the interest on the home loan soon after it is issued. The price cap on the affordable homes of Rs 45 lakh or below has become unrea- sonable with construction and land costs having risen to significant levels in comparison.

What The Developers Wish

The real estate sector pins its hopes on the Modi 3.0 regime for policy initiatives that will overall up- lift the market sentiments that can boost real estate across the country. Taking forward from earlier terms, the government’s continued focus on infrastructure like roads metros and railways will bring more area under development and with ease of con- nectivity will have the potential for more affordable housing.

In conjunction, the long pending land reforms would need to be introduced to simplify the land ac- quisition process. Transparent and effective land records management system will be the driver for real estate growth.

With limited exposure of banks to real estate and as banks only offer construction finance, mid and small developers have limited access to finance. A real estate investment fund or credit guarantees to builders would ensure more organized de- velopments with easier cash flows. In the same vein, favorable pol- icies and tax incentives for rental housing will encourage more devel- opers to foray in this segment. With looming housing shortage, this can be one of the ways to address the problem in urban areas.

The long-standing demand of the real estate sector from the gov- ernment is that of granting infra- structure status. This will not only ensure easier access to institutional credit and help reduce developer’s cost of borrowing but, also translate into cheaper home for the buyers.

In addition, a primary expectation of the real estate sector is a reduction in GST rates on construction materials to enhance affordability and make home-buying more accessible.

The Realty Experts Speak

The real estate community is looking at the upcoming budget with optimism, seeking a strategic roadmap that aligns well with evolving needs of stakeholders including end-users’ developers & investors.

Badal Yagnik, Chief Executive Officer, Colliers India was of the view that the housing, infrastructure development, sustainability and digitization will remain at the core of the budget, which will go a long way in supporting real estate growth across segments in long term. EV infrastructure, renewable energy and green financing will continue to remain in focus creating a strong base for a sustainable future. He added, “Incentivization of green buildings through minimum alternate tax or tax breaks similar to the infrastruc- ture sector will be particularly beneficial. Meanwhile, retail investors are calling for additional rationalizing of the capital gains tax structure. The Union Budget 2024-25 should explore initiatives to boost greater retail engagement in REITs and In-vITs. Moreover, alterations to per- sonal tax slabs have the potential to fuel consumption across various sectors, including real estate assets and allied sectors.”

"To boost economic performance indicators, the real estate industry demands a reorientation of policies and schemes. The PMAY scheme needs to be continually pushed to achieve all housing goals efficiently and time-bound. Reducing the cost of approvals, development premiums, stamp duty, and ready-reckoner rates, in addition to rationaliz- ing tax and GST, will accentuate its growth," said Niranjan Hiranandani, Chairman, NAREDCO (National Real Estate Development Council).

"The government must consider tax rationalization for construction raw materials, as this will significantly impact the industry. To boost the housing segment further, we believe the affordable housing definition needs to be revisited. Given the substantial changes in construc- tion costs, including raw materials, labour, and overall development, it is necessary to reassess the price, size, and income criteria to ensure the program remains inclusive and effective," said Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE.

Amit Goyal, Managing Director said, "India Sotheby's International Realty on an optimistic note adds, “In its recent Monetary Policy Committee (MPC) meeting, the Reserve Bank of India (RBI) projected a GDP growth rate of over 7%. Maintaining this growth rate in a year when several global economies are struggling should be a major focus of the up- coming Union Budget. With the NDA government returning to power for the third consecutive term, we antic- ipate a bold, growth-oriented bud- get that charts a plan for the next five years. We expect announce- ments that will encourage capital investments and increase foreign direct investment (FDI) inflows into India. In the real estate sector, it is crucial to sustain demand for homes, as housing acts as an accelerator for over 200 ancillary sectors.”

Shrinivas Rao, FRICS, CEO, Vestian says that as per the announcements in the interim budget, it is evident that the government will continue to focus on infrastructure development to make India a USD 5 Tn economy in the upcoming years and turn the country into a 'Viksit Bharat' by 2047. To achieve this goal, the real estate sector is likely to play a pivotal role. After resuming a third term, the government has already announced the construction of 3 crore new units under PMAY. This shows the government’s commit- ment towards the real estate sec- tor. Demand for residential units is expected to increase further, if the government increases tax exemp- tion limits for home loans in the Union Budget 2024-25. Moreover, granting industry status to the real estate sector would ease availability of funds and increase participation of foreign investors.”

As per Ravi Subramanian, MD and CEO of Shriram Housing Finance Ltd., the Centre must increase its allocation to the Pradhan Man- tri Awas Yojana (PMAY), which has the potential to unleash height- ened economic activity in the rural economy. “In FY24, the allocation was ?79,000 crore. In FY23, it was Rs 48,000 crore. Every year, we see a substantial jump in the allocation to this category. The demand for housing is so strong in the village economy that it will have a strong bearing on the lives and living stan- dards of the rural people.”

Summing it up, Venkatesh Gopalakrishnan, Director, Group Promot- er’s Office, MD & CEO - Shapoorji Pallonji Real Estate (SPRE) stated, “We advocate for a reduction in long-term capital gains tax, waiving notional rent on second properties, and aligning the income tax rate with corporate rates at around 25 per cent. The government should focus on affordable housing. We propose to reduce GST rates and interest subventions for affordable housing. Single window clearance for the sector has been pending for a long time. We hope to see it grant- ed in this year’s budget. At the same time, we support the industry-wide call for granting 'industry status' to the residential sector, aligning with the government's vision of "housing for all." Additionally, supportive measures, including NAREDCO's appeal for an Rs 50,000 crore fund, will also align with the government's vision of housing for all and could significantly fortify the sector's trajectory. The budget is a chance to redefine affordability as the diverse locations demand different price caps instead of uniformity. Recognizing changing investment dynamics, we suggest expanding Section 80C limits for millennials and Gen-Z home buyers.”

The budget is a chance to redefine affordability as the diverse locations demand different price caps instead of uniformity. Also, the government must consider tax rationalization for real estate sector and buyers.

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Tags : Union Budget 2024-25 finance ministry pre budget Venkatesh Gopalakrishnan Shapoorji Pallonji Real Estate Ravi Subramanian Shriram Housing Finance Ltd Shrinivas Rao FRICS Vestian Anshuman Magazine CBRE Niranjan Hiranandani NAREDCO (National Real Estate Development Council) Badal Yagnik Colliers India