The Real Estate Industry is expecting a lot from the Union Budget which will be presented in few hours from now.
By Varun Singh
The Real Estate Industry has high hopes from the Union Budget that shall be presented by the Finance Minister Nirmal Sitharaman. The budget will be presented in few hours from now.
Below are some of the expectations that, the top real estate consultancy firms like Anarock and JLL have from the Union Budget.
- Hike the INR 2 lakh tax rebate on housing loan interest rates under Section 24 of the Income Tax Act – This could kick-start healthier demand for housing, especially in the affordable and mid-segment categories.
- Personal tax relief, either by a cut in tax rates or favourably readjusted tax slabs – The last increase in the deduction limit under Section 80C (to INR 1.5 lakh a year) was in 2014 and an upward revision is long overdue.
- Include ITC benefit in GST for under-construction homes – While the GST rate on under construction properties was reduced to 5% in 2019, the previous ITC benefit was shelved. Already cash-starved developers cannot avail tax benefits for construction raw materials and the increased costs are passed on to buyers. Providing ITC benefits is a great incentive to reduce property prices and make under-construction homes attractive again.
- Immediate deployment of INR 25K crore AIF – The clock is ticking, and the government needs to act immediately. The allotted stress funds need to be utilized to full potential without delay. Completion of stressed projects will improve homebuyer sentiment and boost demand. Any further delays will result in a domino effect and add more stressed projects.
- Ease liquidity – The ongoing liquidity crunch has a cascading impact across sectors, including real estate. Project delays – the biggest fallout of the cash crunch – have severely dampened buyer sentiments. Easing liquidity will increase capital flow for developers and keep supply – most importantly of high demand ready-to-move-in homes – healthy. Increased supply also keeps prices in check.
- Improve credit off-take from banks – The NBFC crisis has hit the sector hard, and there is enough justification to warrant credit off-take. Apart from recapitalization by the government and stringent measures by RBI, the gross NPAs of banks also improved to nearly 9.1% towards September-end 2019 (against 11.2% the preceding year).
- More incentives for private sector investments in affordable housing – Despite the benefit of infrastructure status for this critically important segment, developers are unable to get funding from major banks and NBFCs at lower interest rates. The profit margins for affordable housing projects are unattractively low.
- Speed up infrastructure development – The Government’s hard focus on infrastructure development is beyond dispute, but its plan to spend INR 100 lakh crores on infrastructure over the next five years can only yield tangible economic results with speedier on-ground implementation. There is a dire need to iron out bottlenecks hampering infrastructure growth.
- Implement land reforms – The new lower 15% tax rate for companies looking to set up new factories can be applied only if they are able to acquire land easily. Implementation of a unique identity numbers or UID for land will bring greater transparency to India’s outdated land records system and help attract more foreign investors and limber up the approval procedure for real estate projects.
- Extension of the Sunset Clause of Special Economic Zones: The government had introduced a sunset clause for SEZs in 2016. According to the clause, only an SEZ unit that commences operations on or before March 31, 2020, shall be eligible for an income tax holiday. Considering the challenges faced by the real estate sector in the last couple of years, there is a need for the government to extend the date and provide the required relief to SEZ units and developers.
- Increase in deduction of interest on home loans u/s 24″ An increase in the deduction of interest on home loans for self-occupation from the existing INR 2 lakh to INR 3 lakh will mainly benefit buyers in the lower and mid-income category. This is expected to incentivise homebuyers in a scenario of weak demand.
- Deduction of pre-EMI interest in the same year” Currently, pre-EMI interest (interest paid during the construction period) can be availed as a deduction only after the construction of the building is complete in 5 equal annual installments. However, homebuyers have been adversely affected due to inordinate construction delays. In order to provide timely relief to homebuyers, it is recommended to provide for the deduction in the same year of interest payment.
- Separate provision for deduction of ‘principal repayment’ on home loans: A separate provision allowing deduction of principal repayment (currently forming part of 80C deduction) will provide homebuyers higher tax benefits towards the latter stage of the loan tenure.
Within few hours it will be known how many of the above mentioned expectations are fulfilled by the Finance minister in the union budget.
Also Read: Here’s What Builders Want From The FM In Union Budget.
