Real Estate sector expects a booster shot in upcoming Union Budget

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India’s real estate sector is expecting further favorable announcements in the upcoming Union Budget that could give the sector a shot in the arm after the Covid-19 pandemic impact.

Multiple measures were already announced in 2020 to beat the unprecedented impact of Covid-19 on the overall economy and the real estate industry. Some of the measures are RBI’s massive repo rate cut of 140 bps that led to the lowest home loan interest rates in over 15 years, a six-month moratorium on EMIs, liquidity boost to National Housing Bank.

Though these measures were proactive and commendable but given the depth of pain in the real estate sector, they were not enough, Anuj Puri, Chairman of ANAROCK Property Consultants said.

Affordable housing is very likely to get another booster shot. However, the budget also needs to focus on the larger market, he said.

Homebuyers and investors need focused tax incentives to get mobilized. Also, the developers’ liquidity woes need to alleviated to forestall further market mayhem.

Here are some of the demands from the sector for the Budget:

  • Hike the Rs 2 lakh tax rebate on housing loan interest rates under Section 24 of the Income Tax Act to at least Rs 5 lakh to generate healthier housing demand, most notably in affordable and mid-segment housing.
  • Personal tax relief, either by tax rate reductions or amended tax slabs – The last increase in the deduction limit under Section 80C (to Rs 1.5 lakh a year) was in 2014 and an upward revision is long overdue.
  • GST waiver for under-construction homes – The present GST rate on under-construction properties is 5% minus the ITC benefit for premium homes (>Rs 45 lakh) and 1% for affordable homes (<Rs 45 lakh). Even a limited period waiver of GST will reduce overall property cost and thus push demand for under-construction homes, which have been slacking presently. Funds from buyers can aid developers towards project construction and thus lessen their dependence on financial institutions. The most-recent limited-period Stamp Duty cut in Maharashtra significantly boosted demand in both MMR and Pune.
  • 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 affordable cost. The profit margins for affordable housing projects continue to be extremely low.
  • Ease liquidity – The liquidity crunch had a cascading impact across sectors, including real estate. Project delays – the biggest fallout of the cash crunch – had severely dampened buyer sentiments in last two years. Developers need a rational capital flow to keep up the supply pipeline, especially for ready-to-move-in homes which are in highest demand – healthy. Increased supply also helps to keep property prices range bound.