Ideally the budget this year has to be extra special keeping in view the unprecedented events, policies and decisions of the past. A sector responsible for direct impact on job creation, development and fast economic growth is in desperate need for the catalyst from the budget . These shots will go a long way in paving way for the future.

The second-largest employer in India and one of the major contributors to its GDP is the real estate industry. Over 200 sectors, from manufacturing to services, are supported by the industry, and any incentives offered to the real estate sector can help boost other related companies.

Here are a few suggestions in relation to significant problems in the industry.

1. Ideally, a foundation for the next seven years’ detailed infrastructure and realty growth plan needs to be initiated and be firmly in place to eventually welcome 2030 with pride. Real estate has to be the investment category of choice and not just a necessity purchase.

2. Tax deduction for home loan principal repayment (Section 80C)

Currently, Section 80C of the Income Tax Act does not offer a benefit specifically for housing, despite the fact that it is the biggest and most significant expenditure for the majority of taxpayers over the course of their lifetime. Even investors have a wide range of options, and the lack of an exclusive tax benefit on the principal amount of mortgages makes them uninterested in buying a home. Housing affordability will increase, and a separate yearly deduction of 1,50,000 for principle payments will give home loan applicants the much-needed boost.

Also Read: Here’s what taxpayers expect from Union Budget 2023

3. Increase the projects’ potential to generate revenue for affordable housing

The deadline for registering an affordable housing project to receive a tax break under Section 80IBA has passed. The Section needs to be reintroduced.

Up until March 31, 2022, projects that have received approval are eligible for a 100% tax break under Section 80IBA. Developers could claim a full tax exemption on earnings under this clause, provided they met certain requirements, such as the date for approval. It is crucial to resurrect this policy since it is undoubtedly the most substantive step to increase the viability of affordable housing developments.

1. Increase the Section 24 home loan deduction cap

The current deduction for interest on house loans under Section 24 is Rs 2 lakh. To increase affordability and housing sales, this needs to be increased to Rs 5 lakh. A certain amount of personal tax relief should be provided by the Union Budget 2023, either in the form of reduced tax rates or revised tax slabs. Additionally, doing so would increase housing absorption. An increase in the tax exemption on interest paid on house loans, exemption on rental incomes, uniformity, and expansion of the definition of affordable housing would be appreciated as the real estate sector prepares to receive help from the Budget.

In order to give India’s real estate projects some much-needed liquidity, the current finance systems must be enhanced. Commercial banks, which have a constrained appetite for risk-taking, are the foundation of the existing system. The government should make it simpler for developers to obtain non-bank funding like institutional investor bonds and equity. The government must also make sure that housing costs are reasonable for all societal groups. In order to prevent price inflation and a crash, it must also ensure that supply and demand are in balance.

2. Relax capital gains requirements to aid homebuyers

Long-term capital gains from the sale of existing homes may be applied to the purchase or construction of new real estate under Section 54 of the Income Tax Act. If the investment for the exemption is made through a property that is still under construction, it can only be claimed if the property’s construction is finished within three years of the sale of the previous residence.

The size of residential projects is constantly expanding in terms of units, height, and amenities, which results in completion times that are longer than three years. Additionally, even if the deployment of RERA has resulted in an improvement, project completion dates that are still in the works routinely go over schedules. This makes it difficult for buyers to recognise capital gains on properties that are still under construction. We suggest that the current three-year completion deadline for properties that are still under development be increased to five years in order to mitigate this.

3. Encourage the development of affordable rental dwellings

For homes costing up to Rs 50 lakh, there is a 100% exemption for rental income up to Rs 3 lakh. This will entice people to make investments in the severely undersupplied market for affordable homes. Owners of such homes avoid renting out their properties because of the low rent yields. Such owners will be directly encouraged by this action to rent out their homes to the targeted sector, enhancing efforts to boost the supply of housing in this segment.

4. Realty products planned and designed with sustainable energy sources, green building codes, water savings etc must have unprecedented benefits to encourage the trend.

5. Water saving products like faucets , innovative flushing systems, cisterns , storage items etc must be made cheaper, to become a pull product, rather than a push product by hardware stores and suppliers . Plumbing and water saving go hand in hand. Hotels, hospitals, institutions etc using water saving devices to be rewarded. .

6. CSR where impact is visible and measurable at construction sites, wrt labour children’s health , education , safety, skilling etc must be looked at to make this a priority area too. The nation is as strong as its future generation.

7. To help expedite the completion of stalled projects, the GST on under-construction projects, barring affordable housing , may be considered , to be brought down to 1%.

8. The holding or lock in period to be lowered from the present 24-36 months to 12 months, for residential properties to qualify as long-term capital assets. Transactions and money in floatation will help revival.

9. Single-window clearance for approvals for ease of business.

10. Awarding of industry status to real estate is a long-standing demand.

11. Reviewing circle rates periodically to boost secondary market transactions.

12. Stamp duty sops for women.

13. Developers rating based on project completion, track record , transparency wrt financial health , defaults or penalties etc.

14. Townships with health and sports facilities be provided encouragement wrt FAR / FSI benefits.

15. Direct taxes slabs for middle class to be reviewed since basic commodity prices have shot up.

16. Recognition and direct benefit to tax payers and good citizens.

17. Investment in smart cities, plots with long term lock in , senior living communities etc must have necessary tax rebates. Family size is reducing and longevity is increasing so it cannot be ignored.

Never, ever forget, we are creating a new piece of India.

Give it our best. A cut above the rest.

(By Dr Ananta Singh Raghuvanshi, Founder Member & President, NAREDCO MAHI)