Indian Union Budget 2021-22: The actual estate sector has an crucial part to play in attaining the government’s vision of ‘Housing for All by 2022’ for India. The Union Budget 2021 can assistance us accelerate towards this aim via policy impetus for the demand side as effectively as for the provide side of the actual estate ecosystem. Budget 2021 is anticipated to help financial recovery and place the economy on the development path once again right after the COVID-19-induced setback. As a stimulus for the actual estate sector will advantage allied industries such as cement as effectively as labor markets and therefore contribute to the GDP development and to the financial recovery, the price range must lay emphasis on enabling demand development in the actual estate sector.
To increase housing demand, the tax exemption limit on household loan interest must be augmented. An elevated limit for deduction of interest on housing loan beneath Section 24(b) from the existing level of Rs 2 lakh for self-occupied house will incentivize tax payers to invest in actual estate.
Furthermore, even the principal deduction beneath Section 80C must be reviewed. The deduction on the repayment of the principal quantity of a housing loan must not be clubbed with other deductions beneath Section 80C, rather it must be separately permitted, excluding the limit of Rs 1.5 lakh beneath Section 80C, for an extra sum of up to Rs 1.5 lakh. The final improve in the deduction limit beneath Section 80C (to Rs 1.5 lakh a year) was in 2014 and an upward revision can, therefore, be deemed. Other tax easing initiatives such as these with regards to Section 80EEA for initially-time household purchasers, wherein the current cap on the house worth to Rs. 50 lakh and on the loan quantity to Rs 35 lakh can be elevated to Rs 75 lakh and Rs 60 lakh, respectively, alongside other measures such as reduction in stamp duty has the possible to stimulate demand in the actual estate business.
On the provide side, I advocate GST reforms and single-window clearance of actual estate projects. The existing GST price on beneath-building properties is 5% minus the Input Tax Credit (ITC) for premium houses [>Rs 45,00,000/- ] and is 1% for reasonably priced houses [<Rs 45,00,000]. A restricted period waiver or reduction on GST will make rates of the properties appealing without having adversely impacting the margins of builders. Furthermore, Goods and Services Tax (GST) reforms beneath 2021 price range must let set-off of GST paid on input components throughout the building phase against the GST paid on rent and other earnings from the house upon completion. Without this reform, the lack of input credit causes dual tax levy on asset owning industrial actual estate developers that rely on leasing or rentals. The GST applicable for industrial properties that are not sold but created for leasing is at 18% on the rental earnings – and must be lowered. The GST reforms will assistance bring down the house rates and therefore spur development in the business.
Furthermore, I advocate a single-window clearance program for actual estate projects. This would simplify the existing procedure that is marred by various approval needs and expedite project delivery when lowering project charges. Digitization of processes, such as layout approval, NHAI permit, approval for water & electrical energy, would assistance to additional enhance efficiency.
Although the all round influence of COVID-19 on the sector has been adverse what’s more telling is that the contours of demand also have changed. For instance, the Work-From-Home trend, driven by many organizations adopting ‘remote working’ and numerous of them arranging to continue it for the foreseeable future, is anticipated to have a powerful bearing on the future of residential demand. Many household dwellers are starting to assume about upgrading their existing household configuration and new purchasers are eyeing units which are developed to allow Work-From-Home for extended periods. These trends have policy implications policy must not only incentivize the reasonably priced household segment but also the all round actual estate sector as a complete.
Budget 2020 heralded numerous positive adjustments such as a reduction in GST prices from 12 % to 5 % for residential apartments and 1 % for EWS/LIG category and also supplied a fresh stimulus to the reasonably priced housing vision via an extension of household loan subsidy and elevated outlay for Pradhan Mantri Awas Yojana (PMAY). During the year, in order to increase housing demand, the Finance Minister announced extra measures such as an extra outlay of about Rs 18,000 crore for PM Awas Yojana. Other demand stimulants such as the Repo price reductions which led to lower in household loan interest prices, the reduction in stamp duty in some circles, as effectively as the moratorium on household loan repayments have mitigated some of the adverse financial influence of the pandemic on the business. Budget 2021 must create additional on these initiatives to drive development in the actual estate sector holistically by incentivizing each the provide side i.e. developers and the demand side i.e. homebuyers.
Budget 2021 has the possible to lay the roadmap for the financial recovery of the nation in a post-COVID planet. I am hopeful that the proposed legislation will allow the actual estate sector to bounce back, to contribute to financial recovery, and to comprehend the vision of ‘Housing for All by 2022’.
(By Mukul Bansal, Director, Motia Group)