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Budget FY23: Realty seeks incentives on home loans, rental income, GST cut on inputs
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SME Times News Bureau | 14 Jan, 2022
With the Union Budget for FY23 round the corner, real estate developers
have started making their suggestions and recommendations to the Centre
for including them in the Budget document.
The Budget will be tabled in the Parliament on February 1.
After
facing strong headwinds during the initial days of the pandemic, the
real estate sector has largely managed to come out of the turbulent
clouds in 2021.
To keep the momentum intact in the high-growth
potential realty sector, several developers have requested the
government to provide incentives on taxes (both principal and interest)
for home loans, on the rental housing segment, and extend some
concessions on income from renting of housing properties.
Also,
some urged the government to remove taxation on notional rental income
in order to further boost demand for new properties, besides reducing
GST on raw materials.
"Housing demand did bounce back strongly
after the first as well as the second wave of the Covid pandemic, driven
mainly by historical low interest rates on home loans. However, the
sector is still plagued with two perennial problems -- unsold
inventories and stalled projects. The third wave has emerged as a
challenge for the sector and the economy," said Dhruv Agarwala, Group
CEO at Housing.com, Makaan.com and Proptiger.com.
"The corpus of
the government-backed stress fund 'SWAMIH' should be hiked to at least
Rs 1 lakh crore. The current corpus of Rs 25,000 crore has already been
committed."
In November 2019, the Centre launched the 'SWAMIH
Investment Fund' to help complete over 1,500 stalled housing projects,
including those that have been declared non-performing assets (NPAs) or
had been admitted for insolvency proceedings.
Any upward revision
in the corpus will help in completion of stuck projects and bring back
the much-needed consumers' trust in the under construction property
market, Agarwala added.
Lately, residential demand has been
resilient, particularly in the mid-to-high-income segments despite all
Covid-led disruptions. The firm demand can be attributed to various
factors such as low rate of interest on home loans, pent-up demand, and
incentives by certain states.
"Schemes such as 'PMAY' have played
a pivotal role in improving home ownership. Continued focus on
budgetary and extra budgetary allotment to such schemes can improve
access to housing in the low-to-mid-income segments of the population.
The pending expenditure on PMAY is over Rs. 1 lakh crore, while the
allocation was Rs 48,000 crore in FY2022 (budget estimate) and Rs.
41,000 crore in FY2021 (revised estimate)," rating agency ICRA said.
The
allocation needs to be ramped up in the forthcoming Budget to meet the
target of 50 million dwelling units under the Pradhan Mantri Awas
Yojana, it opined.
On challenges regarding the implementation of
the bankruptcy process for real estate companies, steps must be taken to
streamline the process to achieve faster adoption and implementation of
resolution plans so that both lenders and home buyers could reap
benefits, ICRA added.
One suggestion which many developers have put forward is to provide industry status to the realty sector.
"There
couldn't be a more opportune year to accord industry status to the real
estate sector as a whole; currently the same has been accorded only to
affordable housing. This is a long-pending demand and can help
developers raise funds at lower costs," said Kaushal Agarwal, Chairman,
The Guardians Real Estate Advisory.
Besides, extending tax
holiday on an income of Rs 10 lakh to taxpayers for a year may also
provide impetus to demand and consumption, Agarwal said.
"The
reduced repo rate has helped reduce EMIs for homebuyers; the government
should permit further deductions in the income tax for individuals
availing homes to buy affordable and mid-income homes," he argued.
In 2021, the industry saw a strong demand for office spaces from the start-up world.
"There
is also a need to reduce GST to the lowest slab for upcoming startups
as it will make a significant impact on their budget. Currently,
coworking spaces charge a GST of 18 per cent to all clients and this is a
big impact to startups," said Manas Mehrotra, Founder, 315Work Avenue, a
leading co-working firm.
"Coworking firms are also hoping that
input tax credit under GST be extended to developers so that it could be
passed on to companies who lease out space and thereby reduce their
overall costs. The industry is also looking forward to an added
infrastructural push from the Government, and a single-window clearance
system that helps in faster establishment of co-working spaces to
non-metro cities as well." Ramani Sastri, Chairman and MD,
Sterling Developers, said: "To boost the consumption in this sector, the
government should focus on providing more liquidity to the taxpayer by
raising the ceiling of the rebate on the home loan interest."
"We
also expect input tax GST credit for developers, reduction in stamp
duty which has happened in several states and registration charges which
make a sizeable difference to the cost of a project, thereby boosting
home buyers' sentiment and encouraging them to go in for property
purchase."
The other category which saw a strong uptick in demand was the second home segment.
To
support the second home segment, there is a specific need for income
tax relief, said Lincoln Bennet Rodrigues, Chairman & Founder, The
Bennet and Bernard Company, which is known for luxury holiday homes in
Goa.
Ramesh Nair, CEO, India and Managing Director, Market
Development, Asia, Colliers, said: "Budget 2022 should continue to focus
on expansionary policy measures to boost consumer spending and
investment. Measures to boost affordable and mid-income housing in the
form of extension and expansion of tax benefit for first-time home
buyers, sops for developers engaged in affordable housing and rental
housing projects will have a positive domino effect on the real estate
sector and the overall economy."
With more than 25 years
presence, Colliers, a Nasdaq-listed company, is a professional
consultancy firm which provides advice to real estate occupiers, owners
and investors with operations in 67 countries.
Also, in line with
India's 'net zero' goal, the Budget should lay a road map for ensuring
sustainable real estate development through financial and non-financial
incentives, Nair added.
Echoing some other real estate players,
Subhankar Mitra, Managing Director, Advisory Services, Colliers India
said that the sector should be given the industry status, which will go
on and help in getting access to cheaper funding.
Further,
Vikas Chaturvedi, Chief Executive Officer, Xanadu Realty, said: "...some
provisions to automate the registration process (needs to be
introduced) so that the need to go physical registration is replaced
with technology would go a long way in reducing consumer inertia. Banks
have already started this through fintech, and real estate has an
enormous need for this initiative."
"In addition, the GST waiver
for under-construction properties, along with reduction on GST for raw
materials, will be a significant relief to the developer community. This
should propel the demand in the affordable housing category."
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