Budget 2022 Real Estate Expectations: The real estate sector witnessed a strong comeback last year as housing sales in top cities jumped to 90% of the pre-covid levels while newly launched units reached the 2019 levels.
Amid uncertainty over how the Omicron-induced third wave of the Covid pandemic may impact real estate activities, the sector has huge expectations from the upcoming Budget.
“The residential sector looks forward to further support beyond the mainstay demands of industry status, easy availability of finance, and GST rates reduction,” said Anuj Puri, chairman, Anarock Group.
Puri shared that the following decisions, if announced in the upcoming Budget, would help spur up residential demand:
Rs 5 lakh Home loan deduction limit
Puri said there is a need to hike the Rs 2 lakh tax rebate on housing loan interest rates under Section 24 of the Income Tax Act to at least Rs 5 Lakh. This could instantly infuse robust demand for housing, especially in the affordable and mid-segment categories.
Kanika Gupta Shori, Founder and COO, Square Yards, also said, “Property stakeholders want the standard Rs 2 lakh tax deduction on interest paid on home loans to be increased to Rs 5 lakhs as it will bring more salaried people in the bracket and help them realize their dream of buying a home. This decision will also keep the housing demand healthy and help property developers recover from the losses and increase their wafer-thin profit margins.”
Deductions for home loan principal repayment, over and above the existing 80C
Personal tax relief, either via a cut in tax rates or revised tax slabs, would be a welcome move – especially since the last increase in the deduction limit under Section 80C (to Rs 1.5 lakh a year) took place in 2014.
Puri said, “The time is certainly ripe for a further upward revision, but there is no denying that the government currently lacks the elbow space for such a move. Instead, it may focus on providing more incentives to MSMEs and SMEs struggling post the pandemic. Also, the government spending on infrastructure may further get a boost.”
Redefine affordable housing criteria
Currently, affordable housing is defined based on the property size, its price, and the buyer’s income. For instance, affordable housing is a unit with carpet area up to 90 sq. m. in non-metropolitan cities and towns, and 60 sq. m. in major cities and valued up to Rs 45 lakh for both. The central bank’s definition, on the other hand, is based on the loans given by banks to people for building homes of buying apartments.
Puri said the government should seriously consider revising the city-wise pricing parameters to include a broader customer base under the benefits of extended to this segment. While the size of units as per its definition (60 sq. m. carpet area) is relatively appropriate, prices of units (up to Rs 45 lakh) are not viable across most cities. For instance, a less than Rs 45 lakh budget is far too low for a city like Mumbai. It needs to be increased to at least Rs 85 lakh.”
As for other top cities, the budget range should be increased to at least Rs 60-65 Lakh. With this price revision, more homes will fall within the affordable price tag, allowing more buyers to avail of multiple benefits like lower GST rates at 1% without ITC, government subsidies, and the tax deduction of a total Rs 3.5 lakh on interest repayment of home loans.
Extend Affordable Housing benefits
As per ANAROCK Research, affordable housing in 2021 accounted for approx. 26% of the overall supply across the top 7 cities. Tax exemption for ARHC will help stave off labour shortage challenges in case of any future disruptions due to the pandemic.
Puri said affordable and rental housing got a big boost in the last Union Budget, with the government extending the period for extra deduction of Rs 1.5 lakh for loans up to 31st March 2022. A further extension of this benefit will ensure buoyant demand for affordable housing in 2022.
Colliers, a commercial real estate brokerage professional services, said the upcoming Budget should focus on policies to boost consumer spending and investment.
“Budget 2022 should continue to focus on expansionary policy measures to boost consumer spending and investment. Measures to boost affordable and mid-income housing in the form of extension and expansion of tax benefit for first-time home buyers, sops for developers engaged in affordable housing and rental housing projects will have a positive domino effect on the real estate sector and the overall economy,” said Colliers India CEO Ramesh Nair said.
TDS relief to NRIs
Amit Goyal, CEO, India Sotheby’s International Realty, said the Government should reduce TDS on property transactions for NRIs and also provide relief on tax penalties on the difference between circle rates and agreement value of properties.
“The difference of more than 10% between the circle rates and agreement values of properties translates into tax penalties under Section 43CA of the Income Tax Act. The government must appreciate that the difference between the circle rate and actual price is much higher in certain areas of Delhi and other parts of the country. Hence, the government should consider extending the relief to up to 20% of the difference,” said Goyal.
“The other pain point is the applicable tax deducted at source (TDS) on property transactions for NRIs. IT is way too high and should be reduced from the current 28.49%, as the refund process still takes significantly longer,” he added.