The demand in the real estate sector has not improved in the last two years. From April 1, 2019, the Goods and Services Tax (GST) Council allowed the real estate developers either to opt for old GST rate with input tax credit benefit or go for the new reduced GST rate without input tax credit. But the move doesn't seem to have helped the developers, who are sitting upon a large number of unsold inventory. Therefore, in the upcoming budget, the developers expect cheap credit availability and tax breaks for home buyers so as to spur demand in the sector.
"Repayment of housing loan principal has to be a separate deduction under the Income Tax Act. At present, it is part of the overall limit of Rs 150,000 which is too less," said Ashish Puravankara, MD, Puravankara Ltd, a housing project developer.
Though the government had encouraged affordable housing projects in the country and announced a number of schemes under the Pradhan Mantri Aawas Yojana (PMAY), availability of credit had taken a hit in the last one year for developers especially from nationalised banks as well as from NBFCs.
"Nationalised banks must compulsorily fund all affordable housing projects at a lower rate. This will help the marketability of affordable housing schemes," said Puravankara. At present, loans for affordable housing projects are given at the same rate as other corporate loans by banks.
Reinstatement of the input tax credit was also demanded by prominent housing developers, even though the subject is not likely to come up in the budget it would be raised in the GST Council later. "Withdrawal of input tax credit to the developers has affected several projects' viability, especially at a time when the sector is consolidating," said Sanjay Dutt, MD and CEO of Tata Realty.
Dutt warned that an excessive tax burden introduced in the Union budget on builders or home buyers would be detrimental in creating housing demand in the country. The construction sector is one of the largest employers and provides employment to more than 40 million people in the country.
Infrastructure sector experts opined that to ignite housing demand in the country Finance Minister Nirmala Sitharaman should introduce a housing rental policy, that makes it easier for developers to offer properties on rental, and allows rental homeowners to avail deduction on their tax bills.
“We are closely working with the government in making a housing rental policy. This can also help give a push to fulfil governments target of creating 10 million affordable housing units,” said Arun Kumar, director, Royal Institution of Chartered Surveyors (RICS). It remains to be seen if Sitharaman’s budget would offer a bonanza for homebuyers to reverse the slowdown in the sector.
