Ahead of the Budget 2023, the real estate sector in India is looking for reforms and incentives from Finance Minister Nirmala Sitharaman in the upcoming Union Budget 2023
Representative Image. Pic/iStock
The Indian real estate sector has weathered the pandemic-induced strong headwinds and has done considerably well last year with the growth outlook for 2023 projected to be firm. Ahead of the Budget 2023, the real estate sector in India is looking for reforms and incentives from Finance Minister Nirmala Sitharaman in the upcoming Union Budget 2023.
"India Inc. has already started pinning hopes on various economic reforms in the upcoming Union Budget 2023-24. Unavoidably, there is quite a bit of overlap with previous years in the form of recurring demands which have, so far, not been or insufficiently met," Anuj Puri, Chairman of ANAROCK Group, said.
"The demands for single-window clearance and industry status for real estate are among the recurrent ones and have yet to be addressed. The sector hopes the forthcoming budget will finally address it. The government must offer more incentives to boost affordable housing. To a noticeable extent, the pandemic derailed the affordable housing growth story since early 2020 – one segment that the current government has rightly stressed since taking charge in 2014. The affordable housing supply by private players has reduced significantly since Covid-19, largely because its buyer class was impacted economically and hence went into wait-and-watch mode. Now, there is a need to make this segment attractive again, not least of all because it resonates well with the government’s housing for all initiative," he added.
Puri further expressed a need for more tax sops for homebuyers as well as investors. The Rs 2 lakh tax rebate on housing loan interest under Section 24 of the Income Tax Act needs to be hiked to at least Rs 5 lakh. This will add momentum to housing demand, particularly in the affordable segment.
Also Read: Budget 2023: Gold industry wants FM Sitharaman to reduce import duty, bring more transparency to sector
"The Budget should offer a degree of personal tax relief, either by ways of lower tax rates or by readjusting tax slabs. Doing so would also help boost housing absorption. The last increase in the deduction limit under Section 80C (to INR 1.5 lakh a year) was in 2014. Another favourable revision is long overdue, though it is admittedly unlikely. Instead, we may see the Budget further incentivising MSMEs and SMEs that are still struggling post the pandemic," he added.
Puri also urged Finance Minister Nirmala Sitharaman to consider revising the price bandwidths for homes to qualify as affordable housing. "Perhaps most importantly, the government should seriously consider revising the price bandwidths for homes to qualify as affordable housing to align with the market dynamics of different cities. The size of units as per the current definition (60 sq. m. carpet area) is fairly appropriate, but the catch-all pricing band of up to Rs 45 lakh for affordable housing is definitely not appropriate across most cities," he said.
"For instance, a price band of Rs 45 lakh or below is far too low in a city like Mumbai, where it should be increased to Rs 85 lakh or more. In other major cities, the qualifying price band should be increased to Rs 60-65 lakh. Such a move would have more homes qualifying as affordable housing, and many more homebuyers would be able to avail the current benefits like reduced GST at 1% without ITC, and other government subsidies," Puri explained.
Ahead of Budget 2023, Dr Niranjan Hiranandani, Vice chairman of Naredco, recommended an increase in standard deduction in Rental housing up to 50 per cent and incentivise service rental apartments by allowing accelerated depreciation.
"In order to accomplish the goal of housing for all, real estate developers should be encouraged to create surplus rental housing with tax incentivization. The industry recommends an increase in standard deduction in rental housing by up to 50 per cent and incentivise service rental apartments by allowing accelerated depreciation. Also, tax on notional income from house property held as stock in trade needs to be waived off completely to boost real estate investment. In addition, the cap on affordable housing should be capped up to Rs1 cr in metro cities as a broader spectrum of homebuyers can avail the benefit of CLSS scheme, as industry witnessed the growth of first-time homebuyers post-pandemic," he said.
Also Read: Budget 2023: What healthcare sector and hospitals expect from FM Nirmala Sitharaman
Hiranandani additionally emphasised on "granting infrastructure status to avail long term cheap funding as this interest rate sensitive sector is grappling with inflation led high cost of credit borrowings. This will help developers to build and deliver housing projects at an affordable cost."
Meanwhile, Vimal Agarwal, Chief Financial Officer of Mahindra Lifespaces, said that the government should increase the rebate on housing loans to Rs. 5 lakhs from the current Rs. 2 lakhs under Section 24 of the income tax act.
"The Indian real estate sector, despite headwinds on account of high inflation and interest has proved its resilience by demonstrating significant growth over the last two years. This traction has been promising for the country's economy by pulling up the performance of various associated sectors as well. Furthermore, with a surge in construction and development, and a rise in FDI inflows, the sector is expected to perform well. However, certain changes could be implemented to further accelerate the growth of the Indian real estate market," he said.
Agarwal further added, "In the forthcoming budget, we expect the government to increase the rebate on housing loans to Rs 5 lakh from the current Rs 2 lakh under Section 24 of the income tax act. We believe this move will boost home buying sentiments, by providing much-needed incentives and further adding momentum to housing demand."
"Moreover, the government should consider incentives to support affordable housing, redefining the ticket price of affordable housing as per cities. In metros such as Mumbai, the price cap of Rs 45 lakh should be increased to at least Rs 75 lakh, while in other cities it should be extended up to Rs 60 lakh. With these price revisions, more homebuyers can avail the benefits of government subsidies, lower GST rates and tax deduction benefits on home loans," he signed off.