NAREDCO’s Budget Prescription For Boosting Realty

The National Real Estate Development Council (NAREDCO), the apex body of real estate developers under the aegis of the Union Housing and Urban Affairs Ministry, has made a number of suggestions /recommendations to the finance ministry about the upcoming budget, to give furher push to the real estate sector.  While acknowledging the Centre’s timely interventions and initiatives to bolster the real estate segment and foster positive customer sentiments, Naredco has come up with the second tranche of the Special Window for Affordable and Mid-Income Housing (SWAMIH) fund with Rs 50,000 corpus in the upcoming union budget for FY 2024-2025, along other budgetary support and relaxations including allowing input tax credit under GST and incentives for rental housing in order to achieve the housing for all target.

Noting that the SWAMIH fund has played a critical role and unlocked liquidity leading to renewed interest among investors, both foreign and domestic in the Indian real estate sector, the industry body has requested the government to create a second tranche of the SWAMIH fund with a corpus value of Rs 50,000 crore.As the ultimate beneficiaries of the fund are the home buyers who have been able to take delivery of their long-stuck dream homes, extension of the lending scheme would be a win-win scenario for both the industry and buyers.

The industry body reiterated its long-standing request for allowing the option of claiming input tax credit by residential project developers with higher GST. Naredco has pointed out that  after the introduction of RERA, accounting has improved with regard to ascertaining the project cost. It said that ITC would also help in enhancing compliance as it would encourage developers to reduce unorganized sector purchase from unregistered persons.

Elucidating the tax burden due to the concept of notional income from housing property held as stock in trade after two years, G Hari Babu, President, Naredco suggested the amendment of Section 23(5) to either abolish ‘notional income’ or increase the timeline by five years for considering the notional income.Under Section 23(5) in case of unsold property, held as stock-in-trade, which is not let out, the annual value of the property after a period of two years post the financial year in which completion certificate was received, will be assessable as income from the property on the basis of its notional rent.

Due to three waves of Covid and subsequent lockdowns since two years and consequential impact on the economy, many tenants who were occupying offices and shops have either closed down or negotiated rentals and have paid zero or minimum rentals.Naredco has recommended that in order to incentivise rental housing in the country the tax burden on notional rental income should be exempted.

Naredco has also suggested several other taxation related amendments including removal of the Rs 2 lakh limit of interest deduction under Section 24 of IT Act 1961 on housing loans to boost housing demand.

In a bid to help real estate projects get better liquidity, and relaxations the industry body has also recommended MSME status to projects with the required parameters and also allowing priority sector lending for real estate projects.

Noting that the Centre has consistently prioritized the goal of providing housing for all through the flagship Pradhan Mantri Awas Yojana, successfully facilitating  housing for millions of citizens, recognizing homeownership as crucial source of financial stability, security and a catalyst for building stronger communities. G Hari Babu notes that the implementation of   budget suggestions/recommendations, will further provide impetus to real estate and housing sector.