A case for affordable investor-friendly realty
Considering that the government’s focus on pushing infrastructure and real estate (particularly affordable housing) has paid rich dividends despite corona setbacks, makes a fit case for keeping up the recovery momentum through demand and supply side budgetary boost. Vinod Behl
Residential real estate, especially affordable and mid-priced housing played a pivotal role in the strong comeback of real estate last year. This was clearly evident as these two segments accounted for about 70% of total homes sales which touched 90% of the pre-pandemic level. As such, there is a clear case for necessary budgetary measures to step up growth momentum. Post-covid boost to home ownership must be further promoted to achieve the crucial goal of ‘Housing for All’.
The budget should ensure that tax benefits to buy affordable homes are not only extended beyond March 31. 2022 but also further increased. Also, to motivate more people to go for home ownership, the provisions pertaining to PMAY should be amended and liberalized to bring more homebuyers under its ambit. Post- Corona, home seekers have been looking for more spacious spaces to fulfill the need for space for home office, online classes for children, physical fitness exercises, yoga and meditation, besides ensuring overall safety and wellness. As such, the upper limit of 60 sq meters and 90 sq meters homes in metros and non-metros for eligibility under PMAY may well be revised. Accordingly, the upper limit of Rs 45 lakh as home cost to avail benefits of PMAY for EWS, affordable and mid-segment housing needs to be further raised. Especially in a city like Mumbai where there is already a case for it due to high home prices.
As the government’s mega push to infrastructure development and connectivity in smaller cities has boosted the trend of home ownership in tier 2 and tier 3 cities, the budget should give sops to boost integrated townships in these cities. Demand side measures should also address the need to lower the cost of acquisition of residential property by way of reducing GST on under construction housing, rationalization of stamp duty and removing anomalies in circle rates and market rates of properties. GST waiver or lower GST on under-construction homes, together with measures to speed up deployment of SWAMIH Fund to complete under-construction homes, will go a long way in reviving home buyers’ confidence in under-construction homes. Along with promoting home ownership, the budget must also provide a boost to rental housing which is crucial to fulfill the ‘Housing for All’ mission.
The budget must address supply side issues, in turn promoting home affordability. There is a clear case of extending income tax holiday to affordable housing developers beyond March 31, 2022. Since the steep rise in the prices of construction materials poses a threat to affordability, therefore, the high GST rates of 28% on cement and wall tiles and 18% on iron and steel products, should be rationalized. Restoration of input tax credit will also come handy. Creating a mechanism for faster project clearances will also help promote home affordability. Making easy and cheap credit available to developers, particularly to those engaged in affordable housing, along with providing idle government land to them at reasonable rates, will help the cause.
Commercial real estate hit hard by office and business disruptions due to multiple lockdowns, needs support from the budget. High transaction cost of properties in terms of TDS for NRIs, should be brought down. Similarly, the increased transaction cost due to significant difference between market rate and collectorate rate should be checked. REITs have helped channelise retail investments into commercial real estate. In order to give further boost to it, long term capital gain period be curtailed, besides increasing the total deduction available under 80C.
Since infrastructure plays a key role in providing an indirect boost to the real estate sector, it is expected that the budget will take further steps to boost it.
Pradeep Aggarwal, Co-Founder & Chairman, Signature Global and Chairman – ASSOCHAM National Council on Real Estate, Housing and Urban Development
We expect the government to double the amount of fund allocation for Pradhan Mantri Awas Yojana to enable more people to realize the dream of owning a home and help achieve the goal of Housing for All by 2022. Further, the finance minister will have to pay attention to the Input Tax Credit, reduce the GST to single-digit on building materials and continue tax holiday for affordable housing developer
Amarjit Bakshi, CMD, Central Park
The sector needs focused measures to further bolster demand in 2022. The demands go beyond getting infrastructure status; credit availability for the under-construction projects, more focus on SWAMIH, and more exemptions to buyers. We also expect the central and state governments today work on reducing GST, circle rates, and stamp duty.
Kanika Gupta, Founder & COO, Square Yards
In order to boost home ownership and in turn helping developers offload their inventory, there should be a stay on stamp duty deduction in tier 1 and tier 2 cities. GST reduction/waiver on raw materials prices will help boost housing demand.
Anuj Puri, Chairman, Anarock
Residential sector needs further support beyond the mainstay demands of industry status ,easy availability of funds and GST reduction. There is a need to hike the tax rebate on housing loan interest rates from Rs 2 lakh to Rs 5 lakh.As affordable housing accounted for 26% of overall housing supply in 2021, the budget should bring more homes under the affordable housing tag by increasing the threshold limit from Rs 45 lakh to Rs 60-65 lakh for top cities and Rs 85 lakh for Mumbai to boost demand. The availability of land for affordable housing should be increased besides extending interest subsidy and tax benefits for homebuyers and developers.
Ramesh Nair, CEO India & MD Market Development, Asia, Colliers
The budget should continue to focus on expansionary policy measures to boost consumer spending and investment. Measures to boost extension and expansion of tax benefits for the first-time home buyers, sops for developers of affordable and rental housing projects, will have a domino effect on the real estate sector. The budget should also provide financial and non-financial incentives to encourage sustainable real estate development.
Nitin Kansal, CFO, Max Estates
The budget should address the long pending demand of the commercial real estate sector to receive input tax credit on GST collected from customers on rentals for built-to-lease properties. This will not only boost CRE but also prove beneficial for retail, shopping malls and hospitality businesses. Another area that the union budget should address is the policies that will help soften the prices of materials accounting for input costs.
Deepak Kapoor, Director, Gulshan Group
This budget must ensure cheaper credit facilities from financial institutions and banks. Terminating stamp duty and registration charges in the gamut of GST would be highly acknowledged. It is hoped that the budget will help people to have more buying power by increasing their disposable incomes. The budget should also provide sops to commercial real estate to overcome the effects of WFH due to multiple lockdowns.
Navdeep Sardana, CMD Whiteland Corporation
The single most important demand pertains to infrastructure status. This will help the sector achieve multiple tax benefits to boost foreign and local investment. The investments from international institutional funds will be exempted from taxes, as they will be termed infrastructure funds. This will eventually reduce borrowing rates for the developer fraternity. Further, incentives for private investment in the housing sector will bring in far reaching benefits.
Mr. Ankit Kansal, Founder & MD, 360 Realtor
Despite fears of Omicron looming large, the industry is well-placed to cope with the crisis,towards quicker recovery, the budget should help the supply side through deeper and wider policy reforms such as interest subsidies to developers, faster mechanisms to obtain clearance and reduced GST rates. Likewise, the budget should also take prudent steps to boost demand in the form of increased tax subsidies, lowering of stamp duty etc.
Rajat Goel, JMD MRG World
Affordable Housing sector has been given the infrastructure status, but the implementation has not been up to the mark. The budget should also address the issue of making cheaper land available in main cities to develop affordable housing. Apart from this, the Government should reduce the GST to a single digit on building materials like steel, cement etc and contractor service, among others.
Harpal Singh Chawla, Director, Spaze Group
The Budget should focus on the commercial segment, which has the potential to attract foreign investment and FDI. The granting of infrastructure status to the entire real estate sector is the need of the hour as it will help attract more investment. Also, this budget must also aim to increase the present savings limit so that the young population gets a higher spending power and look at the real estate sector as an investment avenue.
Amit Modi, Director, ABA Corp & President (Elect), CREDAI Western UP
There is a need for low-cost loans from the banks and financial institutions to keep the residential property affordable by granting industry status to real estate. The idea is to shield both buyers and developers from the implications of fluctuating cost of raw materials. Long-standing demands from the developer community including Single Window Clearance to facilitate faster deliveries and project completions, exemption limit on Interest on home loan, for supporting millions of first-time buyers, and principal deduction rules Under Section 80 C need to be fulfilled. This will make sure that the deduction of principal amount of housing loan repaid would not be clubbed with other deductions under Section 80C. Alternatively, the limit under Section 80C should be increased to Rs 3 lakhs.
Dhiraj Jain, Director, Mahagun Group
We expect this year’s budget to increase the tax limit or increase the limit of the property value so that savings on taxation get increased and the real estate sector gets more attention of buyers.
Kushagr Ansal, President CREDAI Haryana & Director, Ansal Housing
The budget must provide special incentives to the developers and projects offering eco-friendly concepts. It is time that real estate gets infrastructure status that will enable developers to raise funds at lower rates and reduce their cost of capital, which would eventually have a bearing on the overall project cost.
Saransh Trehan, MD, Trehan Group
The government should come out with measures to incentivize developers for building townships in smaller towns and cities to improve the standard of living of people. Further, as it is not possible to own a decent apartment under R 45 lakh in major cities, this ceiling on affordable housing needs to be hiked to realize the mission of ‘Housing for All’.