Expecting a Budget jumpstart

Geetu Vaid

The overall sentiment in the realty sector may be low, but hopes are high as far as the expectations from this year's Union Budget are concerned. After being dealt with a severe blow in the form of demonetisation, the sector is not only awaiting a more transparent and organised system, but also a slew of sops and largesse from the Finance Minister on Feb 1.  Many in the industry feel that the Prime Minister's New Year eve "gift" of lower home loan interest rates had set the tone for things to come, and the Budget is going to bring further good news for the sector. Actually post demonetisation the expectations this year are way higher than they have ever been before. 

On the homebuyers' front   the Finance Minister should not only ease tax slabs and offer higher IT rebate, but also allow higher tax saving on housing loans and house insurance premiums. These measures will increase the purchasing power of buyers which would revive the demand in property market.  

The industry body NAREDCO has also suggested that the sealing of Rs 1.5 lakh u/s 80C be increased to Rs 2.5 lakh and Rs 1 lakh out of that be exclusively reserved for payment of principal borrowed for the purchase of a residential house. This will help in boosting the housing stock as well as sales.

“The government should increase the tax deduction limit for housing loans, especially for buyers in metropolitan cities. The current limit of Rs 2 lakh is insignificant, given the ticket sizes in cities like Mumbai where most houses are priced at Rs 1 crore and above”, says Anuj Puri, Chairman & Country Head, JLL India.

“On the personal taxation front the government should raise tax deduction limit for housing loans up to Rs 5 lakh from present limit of Rs 2 lakh per annum. A similar limit should also be set for principal loan repayment from Rs 1 lakh at present, which would have had a positive impact on encouraging purchase of homes, especially by millions of first time buyers across the nation", says Amit Modi, Director, ABA Corp and Vice President CREDAI Western UP .

Though the past two Budgets have not seen much change on the tax slabs front, the fact that this year the Budget is going to be presented days before Assembly poll in five states will be an important factor. Along with that the general feeling is that the government should be passing on the benefits of demonetisation to the common man.

While homebuyers are looking at home loan interest rates to come in the range of  7-8 per cent, the developers want the project loan interest rate of between 10-12 per cent besides a moratorium on repayment of principal amount of all pending and new loans for three years  to bail out developers struck with delayed / stalled projects. “This will help in early revival of the real estate sector and mitigation of problems faced by consumers as well as developers,”" said Praveen Jain, President, NAREDCO.

The demand for Industry status for the sector and single-window clearance has been long-pending. This year, too, the industry mavens are seeking Industry status that would mitigate financial woes of developers to some extent.  “Delay in according an Industry status to the real estate, does not make it easy for the sector to avail of legitimate finances from banks and other financial institutions. Imagine if clean low cost loans could be obtained from the system, then the cost benefit vis-a-vis high interest loans from outside the system can be passed on to the consumer”, says Amit Modi.

Reiterating the demand Prashant Solomon, Managing Director, Chintels India Ltd. adds, “This will pave way for increased adoption of industry best practices by the developers and attract further investments in the sector. The long and complex process of obtaining approvals, leads to huge time and cost overruns. A single-window clearance will go a long way to ensure that projects remain viable and corporate houses stay invested in the sector.” 

Going a step forward in creating a positive eco system for the sector the industry representative body NAREDCO has asked the government to award infrastructure status to housing sector, at least to cover low and MIG category housing units. “Granting of infrastructure status to projects will attract large companies to the sector and inculcate corporate Governance. For the sake of convenience and uniformity in law, the 'built up area' in the Income Tax Act should be replaced by the 'carpet area' as defined in the Real Estate (Regulation and Development) Act 2016”, said Praveen Jain.  

Putting forth the need for clarity on REITs Prateek Mittal, Chairman of Real Estate & Infrastructure ASSOCHAM said, “Along with One Window Clearance and Industry status to the real estate sector, simplification of the taxation norms for REITs is required”. “We expect clarity on taxes on REITs as the confusion has led to very poor interest by investors. Increase in tax deduction limits for housing loans is extremely critical to boost housing sales as this will lead to many families moving to owned flats instead of rented ones," added  Samir Jasuja, founder and CEO at PropEquity.