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Budget 2021 Expectations: With Finance Minister Nirmala Sitharaman all set to table the Union Budget 2021 on February 1 for 2021-22 fiscal, the pandemic-hit Real Estate sector is eagerly expecting for some big-ticket announcements. Big announcements from Centre could help the Real Estate sector overcome the slowdown it has been experiencing over recent years.
The sector, which is touted to be one of the major pillars of India’s economy, has been witnessing downturn on the backdrop of multiple economic factors including tax and regulatory issues, even before the Covid-19 fiasco. ALSO READ | Budget Session Will Have Question Hour, No Vaccine On Priority For MPs: LS Speaker Om Birla
Even though the government had rolled out certain measures to boost the realty sector post-Coronavirus-induced lockdown, several industry analysts and experts believe that still a lot more needs to be done to catalyse the ailing sector.
Real Estate sector may be in for a bonanza as it is being expected that FM Sitharaman & team will make some big announcements to support the sector, in line with the overall expected themes of growth and recovery.
Let’s have a look at top 5 expectations of Real Estate industry from Union Budget 2021-22:
GST Reforms (Reintroduction of Input Tax Credit)
Industry pundits expect that FM Sitharaman should introduce some strong reforms in Goods and Services Tax (GST) mechanism by bringing back the Input Tax Credit. If it happens, the reform will help builders in significantly cutting down the construction expense – resulting in ease on homebuyers pockets as property prices would come down.
“The government may accede to industry’s demand of allowing set-off of GST paid on input materials during the construction phase against rent and other income from the property upon completion. The lack of input credit is currently seen as a dual tax levy on asset owning commercial real estate developers that rely on leasing or rentals,” Sudarshan Lodha, Co-founder of Strata told ABP LIVE.
“Another welcome measure would be increasing affordability of homes by providing greater income tax benefits for new home buyers. Other areas that may see governmental fillip are affordable housing, further incentives for home loans, and liquidity and credit extension measures for developers,” Lodha added.
Tax Rebates For Homebuyers
Another major expectation of Real Estate industry is extending higher tax relief for homebuyers in the upcoming budget. The incumbent cap of Rs 2 lakh on housing loan under the ambit of Section 24(b) of the Income Tax Act could be extended to Rs 5 lakh. Experts believe that the move would increase savings of people and in the long run drive demand for the industry.
“The government also needs to focus on strengthening the consumers’ capacity by way of more efficient tax rebates and increased tax reliefs to prospective homebuyers. Development firms are already tackling the challenges of liquidity to complete ongoing projects. Moreover, with homebuyers looking primarily to invest in ready-to-move properties, under-construction projects are being neglected,” said Ankush Kaul, President (Sales & marketing) of the Ambience Group.
Measures To Improve Liquidity
Liquidity has been one of the major concerns of the Real Estate industry over several years which took severe toll after demonetisation was announced in 2016. With Covid-19 pandemic further damaging the situation, experts are off the opinion that the Finance Minister must announce measure to ease borrowing.
The recalibrated unlocking of the economy under ‘Mission Reopen’ gained momentum with economic activities springing back under the new normal. The liquidity measures introduced by RBI and FM injected liquidity into the market for it to recuperate quickly. No doubt, that Indian economy has shown greater resilience and is now bullish towards revival from survival mode with GDP forecasts coming in positive scale.
“The government needs to push the well-capitalized NBFC’s to extend liquidity to the real estate developers who availed of the moratorium scheme during the lockdown. The same can have an adverse impact on the supply side if not addressed in the budget speech this year. Separately well-capitalised NBFC’s and banks should be pushed to extend credit and liquidity to the players in the sector who have good equity left in their stuck projects,” Kaushal Agarwal, Chairman of Guardians Real Estate Advisory told ABP LIVE.
Revise Affordable Housing Limit
In order to stop Housing for All scheme from getting derailed, it becomes very important for the Real Estate industry to have enough incentives and margins. Thus, experts believe that affordable housing needs impetus in this Union Budget.
For rental housing, the government should enhance HRA tax exemption and increase depreciation rate for rental projects like in commercial buildings and allow ‘carry on’ of loss from rental income.
“The capping of Rs 45 lakh applicable for an affordable house should be extended to 60 lakhs. This would expand the benefits of affordable housing scheme to more homes and therefore boost the end-user demand. While incentives have been provided to boost the affordable housing segment, there needs to be a reduction in the cost of land, development premiums to incentivize developers to build budget homes,” Navin Makhija, MD of Wadhwa Group said while speaking to ABP LIVE.
Giving Real Estate An ‘Industry Status’
Getting industry status has been one of the long-standing demands of the Real State industry as it will help players in bagging investments, fundraisers and various scheme benefits. Having an industry status will also help builders with timely start and completion of projects which has always been a major concern. Industry status will also give players a single-window clearance which will help to swiftly execute projects making it a win-win situation for developers and homebuyers.
“The real estate sector has a significant direct contribution of around 6-7 to per cent of the GDP. Therefore, it is utmost important that the sector should be accorded with the industry status. Industry status for the sector and single window clearance for projects has been a long-standing demand which we expect the Government to address,” Makhija added.
Apart from this, Real Estate players are expecting a more determined infrastructure push from the Finance Minister not only in the form of funds but with strict guidelines on actual infrastructure deployment. This will certainly boost the real estate sector and also generate more jobs that has been one of the top challenge & priority of the government.
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