Will Budget 2021 deliver the goods for real estate?
The realty industry remains one of the most precise bellwethers of the state of India's economy. Like all other sectors, real estate, which contributes more than 8 percent to the Indian economy, too has expectations. Anuj Puri, Chairman of Anarock Property Consultants, said the housing industry needs focused measures to further bolster demand in 2021. This year, the demands go beyond the usual suspects of single-window clearance and industry status, he said.
Homebuyers and investors need focused tax incentives to get mobilized, he said, adding that developers' liquidity woes need to be alleviated to forestall further market mayhem.
HERE'S WHAT THE REAL ESTATE SECTOR WANTS
(Excerpts from Anarock Property Consultants Chairman Anuj Puri)
Hike the INR 2 lakh tax rebate on housing loan interest rates under Section 24 of the Income Tax Act to at least INR 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 INR 1.5 lakh a year) was in 2014 and an upward revision is long overdue.
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GST waiver for under-construction homes: The present GST rate on under-construction properties is 5% minus the ITC benefit for premium homes (>INR 45 lakh) and 1% for affordable homes ( 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. "With real estate being a major contributor to the country’s GDP and the past year having been a tough one for the industry with the multiple lockdowns and labour shortage, expectations are high on the union budget to help revive it. First and foremost is the classification of real estate under the infrastructure sector, for the industry to benefit from the priority sector lending by banks. There is also an expectation on the government to lower the GST for all housing categories in addition to reinstating input tax credit for developers. While the final budget sops for real estate are awaited, the industry watches keenly if the limits for affordable housing too will be raised this year. In addition to these, there is also an expectation of a raise in tax rebates for the home buyers segment," Vikram Chari, CEO-SmartOwner, Asia's leading real estate fintech firm, said. READ MORE: Mobile industry raises demand for GST rate cut in Budget
