Hit hard by the pandemic and rising interest rates, India’s real estate sector is looking towards FM Nirmala Sitharaman’s Union Budget 2023 announcements with much hope as it believes that only a good handholding from the government can put the sector on a strong footing. There are various long-pending demands – including the demand for industry status and increase in the affordable housing price band — which have not been met yet. However, it is believed that this budget may give some relief to the sector.
Commenting on their budget expectations, Anuj Puri, Chairman, ANAROCK Group, says, “Apart from the recurring demand for single-window clearance and industry status, the real estate industry is pinning hopes for other critical interventions and provisions to the upcoming budget. Among them is the demand for higher incentivisation of affordable housing, which has fallen by the wayside since the pandemic brought the demand for larger homes to the fore. This remains the most important segment of housing in the country and needs a serious short in the arm.”
The budget should also broaden the parameters under which affordable housing is defined for the various incentives provided to this sector, as a pricing band of up to Rs 45 lakh does not help in the larger metros. For example, in the MMR region, a price band of Rs 85 lakh or more for qualifying units is far more appropriate while Rs 60-65 lakh would be appropriate in other metros.
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“With more homes qualifying as affordable housing, the benefits such as lower GST at 1% without ITC
Industry experts believe the government must provide extra incentives to promote affordable housing in addition to the standard requirements for single-window clearance and industry status for real estate.
“Since early 2020, the pandemic has hampered the growth of cheap housing, a sector on which the government has placed a strong emphasis since assuming office in 2014. Since COVID-19, there has been a major decrease in the supply of affordable housing, mostly as a result of buyers becoming financially impacted and adopting a wait-and-see attitude. As this market sector also fits well with the government’s Housing for All goal, there is now a need to promote the purchasers in this market,” says Shiwang Suraj
The Budget 2023 should offer a degree of personal tax relief, either by way of lower tax rates or by readjusting tax slabs. Doing so would also help boost housing absorption.
Avneesh Sood, Director, Eros Group, says, “As the real estate sector gears up to receive support from the Union Budget for 2023-24, an increase in tax exemption on interest paid on home loans, exemption on rental incomes, uniformity and expansion in the definition of affordable housing are needed in the upcoming Budget. We would request the finance minister to strengthen the existing financing systems so it can provide liquidity to stuck real estate projects in India. The current system relies on commercial banks, which have a limited appetite for risk-taking. The government should make it easier for developers to access non-bank financing such as bonds and equity from institutional investors.”
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The government also needs to ensure that the prices of housing are affordable for all segments of society. It must also make sure that there is a balance between supply and demand, so that prices don’t go out of control and lead to a crash. “The government in its forthcoming budget should also look into the availability of land, as well as its cost, before setting prices for houses in India,” says Sood.
Himanshu Garg, Director, RG Group, also believes there is an urgent need for more tax concessions for home buyers as well as investors. “The limit of tax rebate of Rs 2 lakh on housing loan interest needs to be hiked to at least Rs 5 lakh as the sector is still recovering from the impact of pandemic and it will add momentum to the demand for affordable housing. Also, there should be 100% exemption for rental income upto Rs 3 lakh for homes up to Rs 50 lakh as it will encourage individuals to invest in the affordable housing segment which is suffering from a massive housing shortage. It will definitely encourage landlords to lease out their properties to eligible tenants and attract perspective buyers too, supplementing the determination to increase housing stock in this segment.”
The government should also give more space under RERA and NCLT for promoters to revive stuck projects. This will bring down the cases of default and boost the confidence of stakeholders in the sector where completion and possession are the ultimate saviour.
Thankfully, housing sales have bounced back strongly after the second wave of the COVID pandemic. Despite the rise in interest rates on home loans by more than two percentage points over the past year, housing sales have remained strong in 2022, in large part, because of the pent-up demand from the previous two years impacted by the COVID-19 pandemic.
“To sustain this demand, however, the real estate sector needs some fiscal support in the upcoming budget,” says Dhruv Agarwala, Group CEO, Housing.com, PropTiger.com & Makaan.com.
There is a strong case for interest subsidy to first-time homebuyers as this will boost sales in the real estate sector, which is not only the second biggest employer in the country but also creates demand for two hundred other industries, including cement and steel.
“The Finance Minister should also consider the industry’s long-pending demand for an increase in tax incentives for both principal and interest paid on home loans by borrowers. There is also a need to enhance the corpus of the stress fund SWAMIH from Rs 15,000 crore to at least Rs 50,000 crore to ensure that more stalled projects get completed. This will go a long way in rebuilding the trust of homebuyers in the residential real estate market,” adds Agarwala.