A Lot Is Expected From the Upcoming Union Budget
In an interaction with Realty+, Amit Bhagat, CEO & MD, ASK Property Investment Advisors shares his expectations from the Budget to catalyse both demand and supply side in real estate. Expectations to catalyse demand: Tax benefits for home buyers need to be increased in sync with inflation. Under Sec 80C, Deduction for Principal Repayment is currently Rs 1.5 lakh and under Sec 80EEE, Additional deduction for interest payment by a first-time homebuyer is Rs 0.5 lakh. We suggest, both should be increased to Rs 3 lakh each. These tax benefits are critical to aid the middle class and the salaried employees as home purchases typically represents their largest investment. Extension of Credit Linked Subsidy Scheme (CLSS) - Pradhan Mantri Awas Yojana (PMAY): This has been a successful scheme for incentivising first time homebuyers and its duration must be extended by another 5 years across EWS, LIG and MIG categories. Expectations to catalyse supply: To boost to Affordable Housing, the definition must be broadened to cater to a wider audience of developers and homebuyers. The below suggested definition can be used for the same: Restate GST input tax credit for residential housing: Considering the rising labour costs and commodity prices, the reinstatement of input tax credit would aid to keep project costs low. This will ensure the rising cost do not have a negative impact on the affordability for the home buyer and the fragile recovery being witnessed across the sector. Incentivising rental housing: Will the redefining of ‘affordable housing’ boost residential realty especially in metros? Affordable housing should be redefined based on both unit size and value as suggested below. Tax deduction on profits from affordable housing projects (Section 80IBA) to be extended: This deduction has been useful in attracting quality developers towards the affordable segment and must be extended for projects registered till Mar-24 (vs the current Mar-22). The project completion criteria (of 5 years) can be relaxed by 1 year for projects under construction during the last 2 years to incorporate for the delays in construction witnessed during the numerous waves of the pandemic. How can the financing systems be strengthened to provide liquidity to developers What are the continuous & consistent government measures that can support real estate? Sustainable development must be incentivized. Projects that are LEED Platinum/Gold pre-certified must be provided funding within 15 days of their application to lending institutions, subject to debt, feasibility, and other mandatory checks. Quick availability of funding will incentivise developers to upgrade their development plans to increase the sustainability quotient in their projects.
Debt resolution through the Insolvency and Bankruptcy Code (IBC) needs to be expedited with the length being restricted to 12 months. Timely resolution is critical to protect the interests of the home buyer and unlocking of the lender’s capital for further deployment.