The real estate sector is currently in the positive territory, and expects to achieve more significant milestones this year. However, to maintain its growth momentum, the sector needs more support from the government and is looking towards the upcoming Union Budget 2023, which the finance minister will present on February 1, with much hope.
The developer community is expecting favourable announcements in the budget and expects the FM to consider its key demands which include softening input costs load, benefits to home buyers to boost demand in the mid and affordable housing segment, and separate deduction for home loan principal repayment, among others.
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Talking about their expectations, Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd, said, “With interest rates rising, a lot depends on the upcoming Budget 2023 to support and sustain the housing demand. The government should rationalise GST rates for construction materials like steel, cement, and tiles. Additionally, the government should put aside more funds under the stress fund SWAMIH. Policies should be relaxed, or the scope of policy should be widened so that stuck projects can be completed.”
The credit linked subsidy under the Credit Linked Subsidy Scheme (CLSS) has been a big saving and motivation for homebuyers, and should be continued to achieve the ‘Housing for All’ mission. “The RBI needs to be vigilant in its adjustment of the repo rate. A minor increase in the repo rate is a corrective measure that will offset future negative impacts of inflation. Hence, we look at this scenario with pragmatic optimism and approach the market with a bullish perspective,” Aggarwal adds.
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The budget must aim at reforms to inject liquidity into the market, further maintaining the growth momentum.
Atul Banshal, Director-Finance, Omaxe Ltd, said, “The budget should consider reducing stamp duty as that will assist it in resuming a robust real estate market and complete the Housing for All mission for the Central government. The government must consider increasing the tax rebate on home mortgage interest from Rs 2 lakh to at least Rs 3 lakh. It is also necessary to have separate deductions for principal repayments, which are currently included under Section 80(C). The current limit of Rs 1.5 lakh should also be raised to Rs 3 lakh.”
Currently, there are no regulations governing brokerage fees; neither the buyer nor the developer is required to pay the required commission on each transaction. “Consequently, collecting the existing 18% GST rate on brokerage services falls solely on realtors. Thus, real estate brokerage services must be brought on par with other service providers by lowering the GST rate to a more manageable 5% as this tax cut could encourage more realty agents to join the tax system, benefiting the government’s revenue collection,” he added.
India’s real estate sector is among the largest contributors to India’s GDP. The sector drives numerous industries, from manufacturing to services, and incentives granted to the sector can also boost the associated industries.
Santosh Agarwal, CFO, and Executive Director, Alpha Corp, said “We are looking forward to a revolutionary Union Budget that focuses on strengthening the real estate sector’s role in India’s economic growth and making the market more appealing to investors and customers. It is critical that the government considers expanding income tax benefits in order to make them more lucrative. We expect the maximum tax rate of 30% to be reduced to 25% to improve the buying power of individuals and the interest rate saving cap should also be increased to Rs 5 lakh. We also expect the administration to respond to calls for a single-window clearance system. Considering the possible slowdown, the finance minister is expected to consider all the aspects of the economic growth path and formulate the policies accordingly. We are optimistic that the government would shape its policy actions to promote the real estate demand even further this year.”
Besides residential, the year 2022 has been remarkable for the retail segment as well. According to CBRE, retail leasing rose by 114% last year. The promising outlook would further receive a stimulus if the Union Budget meets the significant demand of the sector. To maintain the growth momentum, the Indian government must rationalise existing regulations to encourage investment.
Abhishek Trehan, Executive Director, Trehan Iris, said, “To stimulate healthy growth in the residential segment, the government should look into maintaining a steady and low-interest rate which would lead to steady EMIs and keep the demand high in the housing sector. Besides, the project financing interest rates should be regulated, which are currently 7-8% above the home loan rates. Therefore, not only the rate of interest be reduced on project financing, but also a real estate-focused government fund should be provisioned for flexible access to capital at a minimal rate of interest.”
Granting industry status to the realty sector is a long-standing demand by developers that the government should consider. “Retail space and mall developers are expecting holistic support from the forthcoming budget. The growth potential of the retail sector can be leveraged only with the help of upgraded infrastructure, better connectivity, and appealing announcements attracting investment. Simultaneously, the upcoming budget should continue to emphasise measures to boost consumer spending and investment,” Trehan said.