The real estate sector is looking up to the Union Budget 2017-18 as the balm that will cure many headches faced by the sector, especially after the government's demonetisation move.
We are awaiting certain crucial changes and certain pertinent steps to strengthen the sector. Firstly, an industry status is expected for the entire housing and more particularly affordable housing sector. Construction and acquisition finance should also get included in the Priority Sector Lending for banks, industry sources said .
Additionally, there are demands from the sector to increase the tax deduction limit for housing loans from Rs 2,00,000 to Rs 4,00,000, especially for buyers in metropolitan cities.
"This will help the buyer to save almost 30-35 per cent of his/her taxes. Tax benefit, in the case of a home loan, is provided to a buyer after the possession of an apartment. This should be considered from the day the construction of a particular project has started," said Sailesh Puranik, MD, Puranik Builders.
This year is expected to be the year when the Smart Cities Initiative, RERA (Real Estate Regulatory Act), and GST are also expected to boost the sector in the right direction.
While affordable housing seems to occupy the mind of the government more before budget, there are indications that the slump in home buying is being faced in all segments of the sector.
A single-window clearance and subsidised schemes for homes up to Rs 1 crore has also been sought in the Union Budget this year by developers.
Meanwhile, to overcome short-term turbulence caused in the overall real state sector by demonetisation, measures to boost buyers as well as developers’ confidence are largely expected.
"There are still concerns about the rate fixing of GST in real estate and construction industry. It should be be fixed at a rate which must eventually benefit buyers as all indirect taxes are ultimately borne by the buyers," said Jaffer Ali, founder and CEO of real estate firm PropUrban.
According to Ali, owing to multiple taxes in the sector, the government's move to have a Real Estate Investment Trust fund has also not seen a single listing even a year after it was introduced.
While the government had last year announced lower interest rates of three per cent for home loans not exceeding Rs 12 lakh, the real estate sector now wonder if similar benefits could be extended to first time home buyers in bigger cities in this budget.
"Can middle class youth buying their first house in an affordable project get additional income tax incentives for at least five years? Given the lack of institutionalised rental housing in Indian cities, such a move could spur many fence-sitters into moving out from their rented apartments into owned houses. It could also make developers come up with products suiting this segment," said Anuj Puri, Chairman and country head, JLL India.
There are demands to the Finance Ministry from real estate sector to take a relook at the house rent allowance deductions allowed under Income Tax rules.
"The current deduction on house rent limits are set very low. The finance minister can make this limit more realistic and bring it in sync with today’s housing rents," said Puri.
The government is keen to achieve 'Housing for All by 2022' scheme and had initiated a number of measures in last year's budget, which included 100 per cent deduction of profits to an undertaking from a housing project for flats upto 30 sq. metres in four metro cities and 60 sq. metres in other cities, approved during June 2016 to March 2019, and completed within three years of the approval. This was aimed at encouraging developers to construct affordable housing.
"There are some mismatch in the way the market has worked vis-à- vis the expectations of the government and thus even after 18 months of formally launching this initiative, the progress is nothing to write home about. To revive this the government must make home buying more affordable for all, provide clarity on tax rates applicable for construction projects and pay heed to the needs of the growing middle class in this budget," said Anshul Jain, MD, Cushman and Weikfield.