What Does The Indian Real Estate Sector Expect From Sitharaman’s Maiden Budget
By and large, Indian real estate developers failed to see much of the promised ache din during the entire tenure of Prime Minister Narendra Modi-led government that lasted from 2014 to 2019. For all the reformatory changes promising long-term benefits to the sector — these include RERA, GST, the insolvency code, etc., the tide is yet to turn for the builder community.
Data available with PropTiger.com shows that developers have yet to offload a huge inventory stock — at the end of the financial year 2018-19, there were over eight lakh such units lying across India’s nine key property markets. At the current sales velocity, builders would have to wait for almost two and a half years before they are able to unload this inventory. Adding to the developers’ worries is the fact that housing sales continued to decline in the last quarter of the previous financial year. An ongoing financial crunch, aggravated by the NBFC crisis is only making matters worse.
India’s real estate sector, as it stands today, is still far from overcoming the bad days. It is precisely this issue that the sector will expect Finance Minister Nirmala Sitharaman to address when she presents her maiden budget.
What does the real estate sector expect the government to do?
Since all hopes of a revival largely depend on homebuyers ditching the fence and resuming home buying at a juncture when financial institutions are wary of lending to realtors in the wake of defaults; developers expect the government to offer more relief to home loan borrowers.
Tax breaks for buyers
Developers are unanimous in their opinion that the government must enable buyers to save more by providing them deduction on income tax. “We expect this year’s budget to increase the income tax exemption limit from the current Rs 2.5 lakh to at Rs 5 lakh,” shares Manoj Gaur, managing director, Gaurs Group.
“Section 80EE provides a deduction of Rs 50,000 for the first-time homebuyers if the property is not above Rs 50 lakhs, irrespective of the size or location. We expect this year’s budget to increase this tax limit or increase the limit of the property value, so that savings on taxation gets increased, and the real estate sector becomes an important investment option for buyers,” points out Dhiraj Jain, director of Mahagun Group.
Kushagr Ansal, director Ansal Housing, echoes same view. “This budget must aim at increasing the present savings limit so that the young population in the country gets higher spending power and can consider the real estate sector as an investment avenue,” he says.
Waiving stamp duty
Waiving stamp duty on real estate deals, is another long-pending demand of the real estate sector. Since the country now has a uniform law in the form of the Goods and Services Tax (GST), the only logical step forward is to simplify the home-buying process by subsuming stamp duty under the new tax regime. “Bringing stamp duty and registration charges in the ambit of GST, will be highly appreciated,” explains Gaur.
Better clarity on GST
Realtors are also of the opinion that the government must make changes in the GST framework to offer the community better clarity. They expect some rationalisation in rates so that there is no cost-related pressure on the affordable housing segment. According to Kaushal Jain Managing Director of the Arihant Group, GST rates should be revised for construction materials to make them more affordable.
“It is imperative that the government brings more clarity towards input tax credit adjustment in GST,” says Harinder Singh Hora, MD, Reach Group.
Another long-standing demand industry status for the real estate sector. “It is time that the real estate sector got an industry status. This will enable developers to raise funds at lower rates and reduce their cost of capital, which would eventually have a bearing on the overall project cost,” says Ansal.
A single-window clearance system so that projects are completed in a time-bound manner, is another demand from the developers. “The sector is in dire need of an approval mechanism that would work in a time-bound manner,” points out Rajat Goel, Joint MD, MRG World, adding that the use of new technologies must be encouraged for speedy construction work.