After a lackluster 2020, the year 2021 turned out to be a much better year for real estate. During 2021, most of the developers reported much improved sales and leasing activities. Amid lower interest rate regime and stable prices, developers are hopeful the momentum will continue in 2022 especially with some help from the government. Developers are expecting that the upcoming budget scheduled to be presented on February 1 will extend some helping hand to the sector.
“At a time when the economy is anxious about recovery due to the Omicron threat, we look forward to a positive approach from the budget. In addition to agriculture, the focus is likely to be maintained on manufacturing, infrastructure, and the real estate sector in the budget. On the wish list will once again be infrastructure status for real estate sector. It has the potential to unlock a host of benefits for boosting foreign as well domestic investment. Reduction in GST rates of key construction material, extension of credit linked subsidy scheme (CLSS) and enhancement in interest deduction limits on housing loans are also highly desirable,” said Anurag Mathur, CEO, Savills India.
Introduction of alternative asset classes in REITs could fundamentally increase both retail and investor participation in the real estate sector. A benevolent approach towards the financially-depleted demand side through additional tax deductions will be welcome too. “The country is poised for growth in Life Sciences R&D. A special policy focus on this aimed at attracting investment in R&D real estate will provide a great platform for future. All these will go a long way in attracting investment, accelerating demand, and supporting a higher growth trajectory,” Mathur added.
Developers say the rising cases of COVID-19 is a matter of serious concern once again for the civic infrastructure and human capital of our country, however with vaccinations and other preventive measures they hope to curb the impact of this third wave as much as possible on real estate as well as the entire economy.
“With signs of revival already visible over the last few months, the realty sector is looking at robust housing demand in 2022 and beyond. While interest rates are already at their lowest, a tax holiday for homebuyers will go a long way in boosting the market sentiment, nudging fence sitters to take a decision. Focus should be given to stalled/ stressed projects, apart from providing impetus to affordable and rental housing as we enter 2022 . This will likely free up capital and provide liquidity to the sector. Additionally, serious thoughts need to be given to GST towards major input materials as the rising cost structure could lead to long-term increase in prices thereby softening demand,” says Farshid Cooper, MD, Spenta Corporation.
The Union Budget is also expected to announce customer-friendly steps such as tax reliefs to homebuyers to encourage and empower them.
Yashank Wason, Managing Director, Royal Green Realty, says, “The realty sector in the pandemic has become one of the most trusted investment choices for buyers and investors. The sector, despite early shocks, effectively utilized the emerging trends and customer choices to sustain growth. Technology adoption and digitalisation largely aided growth. We saw how favourable government policies such as stamp duty cuts, low-interest rates on home loans and infrastructure development supported the sector. We expect that the Union Budget will announce customer-friendly steps such as tax reliefs to homebuyers to encourage and empower them. We also expect a single-window clearance mechanism to fast track approvals and avoid project delays. The sector is one of the largest employers and growth engines, and efforts should be made on boosting connectivity, industrialisation and technology penetration across the country to strengthen the investment climate, generate better revenues and accelerate the country’s development.”
Commenting on the expectations from Budget 2022-23, Nitin Kansal, CFO, Max Estates Ltd, said, “We hope that the upcoming union budget would act as an enabler by accepting the long-standing demand of the commercial real estate sector to receive an input tax credit on GST collected from customers on rentals for built-to-lease properties. This shift would not only boost the CRE business, but also prove beneficial for various other businesses like retail, hospitality & hotels, malls etc. From a residential real estate lens, a few key relaxations like an increase in tax rebates on interest on housing loans and serious relook of the definition of ‘affordable’ both from the value of the house as well as its size will provide a much-needed boost to the sector. Another area that the union budget should look at is policies that will help soften the prices of input costs to aid further improvement of the affordability index.”
It may be noted that the real estate sector is the second-highest employment generator in India. The industry is expected to reach a market size of $1 trillion by 2030, while contributing around 13% to the GDP of the economy by 2025. These positive changes in policies will provide a boost to the sector and enable strong developers to create quality spaces and value for the economy.
Some of the developers want the Finance Minister to announce liquidity-boosting measures.
“The recent debt crisis in some of the large NBFCs has hurt the real estate sector, which was already grappling with a liquidity crunch. The government has been proactive in resolving the issues pertaining to different segments of the economy, including the real estate sector. However, the liquidity crunch is a serious problem for the realtors, especially the smaller developers. We urge Finance Minister Nirmala Sitharaman to help in mitigating the funding issues for the sector. Giving ‘industry status’ to the real estate sector could be a small step in this direction. Last mile funding is also required to complete the ongoing projects,” said R K Arora, Chairman, Supertech Ltd.
Developers are also of the view that in order to enhance living standards in tier II and III cities, the government should encourage developers to enter smaller towns and cities.
“The government should come out with measures to incentivise developers for building townships in smaller towns and cities. Well-planned townships will go a long way in improving the standard of people in such areas. In addition to it, the definition of affordable housing needs to be changed as it is nearly impossible to own a decent apartment under Rs 45 lakh in major cities. The Rs 45 lakh ceiling needs to be enhanced significantly to ensure housing for all become a reality in a shorter time,” said Saransh Trehan, Managing Director, Trehan Group, which has projects in places like Alwar, Bhiwadi and Gurugram.
Others too are demanding enhancement of ceiling for classification as ‘affordable housing’. “The current ceiling of Rs 45 lakh for classifying as affordable housing needs to be looked into. It should be enhanced to Rs 75 lakh at least. Also, the building raw material cost has gone up significantly in the last few years, particularly since the Covid outbreak. The Hon’ble Finance Minister needs to announce some measures to cool off raw material prices and lowering taxation on these should be considered in the upcoming budget, at least in the short run,” said Suren Goyal, Partner, RPS Group.
“In the last Union Budget, the government did provide incentives for affordable and rental housing by extending the additional deduction of Rs 1.5 lakh for loans taken by March 2022. We are expecting the government to extend the scheme and enhance the additional deduction of Rs 2.5 lakh as it will provide a further fillip to the affordable as well as mid housing segment,” he added.