Anushruti Singh
As Finance Minister Nirmala Sitharaman gets ready to present her second budget on February 1, expectations are running high across sectors. Real estate is one such sector that is keeping its hopes high for relief from the upcoming Union Budget 2020-2021. The sector, that contributes to over eight per cent of the Indian economy, has been going through a prolonged slump.
According to the industry leaders, the government’s previous reforms took a toll on real estate developers as they continue to add unsold inventory at a steady pace. Besides these hiccups, the sector was majorly hit by the liquidation crisis. Keeping the ongoing challenges in mind, the sector expects immediate government measures for a resolution. “We are expecting corrective measures that would ease out of the liquidity challenges the sector is grappling with. The ease of liquidity can enable the buyers to make purchases and also support the idea of ‘Housing-For-All’,” says Rajan Bandelkar, president, National Real Estate Development Council (NAREDCO), and also managing director at Raunak Group.
On the other hand, Anarock Property Consultants Chairman Anuj Puri wants faster implementation of alternative investment funds (AIF) to rescue stressed residential projects.
“The pressure on the Finance Minister is as high as it could possibly go, considering the state of the economy. The sector is expecting that the government will unleash a plethora of goodies – from tax cuts and other consumption boosters to increasing credit off-take from banks to ease liquidity,” he adds.
The Rs. 25,000-crore AIF is imperative for the sector as the clock is ticking and the government needs to act immediately, Puri feels. “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,” he believes.
Lately residential real estate is muted due to subdued demand and cash crunch. As per the ANAROCK data, average housing prices in 2019 maintained status quo across the top seven cities, with a minuscule 1 per cent yearly gain in MMR (Mumbai Metropolitan Region), Pune, Bengaluru and Hyderabad. NCR and Chennai saw no change at all, while Kolkata saw a 1 per cent decline in 2019. Interestingly, between the pre- and post-demonetization period (2016 vs 2019), the end-user and IT-driven markets of Bengaluru, Hyderabad and Pune saw the maximum price increase in three years at 6 per cent, 5 per cent and 4 per cent, respectively.
The real financial impetus to the real estate sector can come with a major overhaul in terms of GST relief and curtailing home loan rates, the data states. The industry stakeholders expect rationalization of taxes and premiums, where stamp duty charges can be included in the GST rate. The experts are hoping for FM to consider enhanced deduction tenure for taxation purposes, which will boost home buying. To ensure consistency and seamlessness, the government will have “to take steps and eradicate the hurdles from the course of growth of the industry.”
Kaushal Agarwal, chairman, The Guardians Real Estate Advisory, anticipates, “The expectation of real estate contributing 13-14 per cent to the nation’s GDP by 2025 can materialize if the requisite support to this sector is extended starting this Budget. Incentivizing customers for purchase of real estate with a 50 per cent reversal of paid GST could go a long way in helping boost demand alongside the much-anticipated change in tax slabs. A slight change in the second-highest tax slab of 20 per cent could impact as much as 27 per cent or 1.47 crore of individual taxpayers.”
Bandelkar demands a one-time subvention scheme and restructuring of realty sector loans. “The real estate sector needs treatment like the information technology sector where tax holidays and moratorium played a key role. Also, slashing of home loan rates will change the demand dynamics among the low, middle and higher-income groups,” he shares.
The sector experts also expect the FM to come up with tax rebate for new homebuyers.
Praveen Shetty of Runwal Group wants the FM to provide income tax rebate for new homebuyers. “With GST, stamp duty, income tax, and capital gains tax already a burden on homebuyers, income tax rebate should be provided for new homebuyers. Including ITC benefit in GST for under-construction homes will be a great incentive to reduce property prices and make under-construction homes attractive again.”
Moreover, norms for raising funds from “other sources should be relaxed as the real estate sector has been going through liquidity crunch, with the ongoing NBFC crisis worsening the situation further, adds Shetty.
Single-window clearance system for the timely completion of the projects is another area where the industry wants the government to look at. The sector leaders believe the single-window system clearance will provide speedy clearances and approvals of projects, making it a win-win situation of both developers and homebuyers.
Dotom Realty director Ketan Musale demands the industry status for the real estate sector, along with skill imparting initiatives. “The entire real estate sector should immediately be granted industry status to make it eligible to avail finances from banks on lower interest rates. We also expect support on skill development initiatives as it requires skilled workers to handle technology and new-age tools.
Expectations from Budget 2020:
- Give ‘Industry Status’ to the Real Estate sector as a whole. Currently the same has been conferred only to affordable housing. This is a long-pending demand that is expected to help developers raise funds at lower costs.
- The government needs to push the well-capitalized NBFCs to extend liquidity to the sector; and look at a resolution mechanism for the stressed NBFCs and banks to enable seamless credit for developers and homebuyers.
- The additional tax benefit for home loan interest announced in the previous Budget now takes the tally to Rs. 3.5 lakh (Section 24 (b) & 80 EEA) for homes worth Rs. 45 lakh circle value. The same needs to be extended for homes costing up to Rs. 1 crore to benefit the middle-class families residing in Metro cities.
- The additional income tax benefit for home loan interest which was announced for home loans sanctioned between Apr 2019-Mar 2020 needs to be extended for a minimum of 3 more years.
- The period of exemption from levy of tax on notional rent, on unsold inventories, needs to be extended to 3 years from 2 after receiving the Occupation Certificate. This is keeping in mind the slow reduction in unsold inventory levels and lackluster demand for real estate assets.
- The tax rebate on the development of affordable housing needs to be extended further to incentivize the development of affordable housing projects.
- Extending no tax up to an income of Rs. 5 lakh to all taxpayers.
- Change in the second-highest tax slab of 20 per cent could impact as much as 27 per cent or 1.47 crore of individual taxpayers. This will leave more money in the hands of the taxpayers and increase their home loan EMI appetite.
- Incentivizing customers for purchase of real estate with a 50 per cent reversal of paid GST could go a long way in helping boost demand alongside the much-anticipated change in tax slabs.
- Increasing the standard deduction to Rs. 75,000 for salaried professionals will benefit not less than 2.3 crore salaried taxpayers.
- The government should declare the rent income received from any one owned house as tax-free across the country.
