The real estate sector has started showing signs of recovery after the pandemic disruption. Green shoots have started coming up. However, the recovery is gradual and requires careful support from the government in order to sustain the recently-achieved growth momentum.
2022 is the year when the real estate sector is looking forward to emerge strongly from the slump and re-entering a phase of growth and pull various other allied sectors out of the slump. As the Union Budget 2022 is around the corner, the sector is hoping the budget to provide strong impetus for recovery and growth.
Measures to increase demand
The residential sector expects the government to provide home buyers with tax incentives and reliefs to push the housing sector demand. The government could make revisions to the income tax slabs and provide some additional tax benefits to the middle class. This will put more dispensable income in the hands of potential homebuyers. Additionally raising the limit of Rs 2 lakh exemption on home loan interest to Rs 5 lakh under section 24(B) of the Income-tax Act would motivate more buyers to invest in the housing sector.
Some sections have been demanding the rental income to be made total tax-free to make investing in properties more attractive. The affordable housing bracket should be expanded up to at least Rs 75 lakh so that more homebuyers can take advantage of the scheme. This will be beneficial especially to buyers in metor cities where land prices are very high and even mid-size homes fall out of the current bracket.
GST reduction on under-construction properties is another important expectation of the sector. Bringing back the input tax credit will also be a welcome step. The budget should also reduce GST on raw materials like steel, marble, timber, plastic and cement to promote construction activities. These measures will help in the reduction of the costs of properties and this benefit can be passed on to the buyers. Currently, home buyers have to pay GST as well as stamp duty on the purchase of property. Having a unified tax on property transactions would make business much more simplified. Reduction of stamp duty is another expectation of the sector from the budget. Taxes on the long-term capital gains on the sale of property should also be significantly reduced.
Another tax reform is expected in the co-working spaces. The major income in the co-working spaces comes from the services provided to the users. Co-working space owners will expect the budget to reduce the TDS on the income from their property.
Ease of doing business
The real estate sector expects the government to relax the regulatory compliance issues. This will help developers focus on the real issues like completing the projects on time. The sector also hopes the budget to have provisions to reduce the risk weightage on the loans to the real estate developers. To be included in the infrastructure sector has been one of the long-standing demands of the realty sector. One of the most important effects of this will be the increased ease in raising funds for the industry, especially from the non-banking financial institutions. Capital crunch has gripped the real estate sector for several years now. This will greatly help in reducing this crisis.
Encourage the use of technology
The experience of the lockdown and the subsequent labour crisis has left a long-lasting impression on the real estate sector. Many developers are looking to reduce their dependence on human labour and invest in the latest technologies. These technologies will not only save costs in the long run but also reduce wastages and errors. Furthermore, the use of green construction material will help in reducing the carbon footprint and be instrumental in achieving the country’s target of being carbon neutral by 2070. However, technologies come at a price. The real estate sector expects the government to incentivize the use of technology in the form of subsidies, interest-free loans, import duty exemptions, and preference in government projects.
The real estate sector is one of the strongest pillars of the country’s economy. Not only does it employ thousands of people and contribute heavily to the nation’s GDP, but also fulfills the dreams and aspirations of millions of Indians. Various allied sectors get benefitted from a healthy real estate sector. Therefore, it is imperative for the government to pay special attention to the sector and have provisions for its well-being in the upcoming Union Budget 2022.
(By Mohit Batra, Regional Director, Realistic Realtors)