The upcoming Interim Budget is a timely opportunity for the incumbent government to further consolidate its legacy in the real estate sector. After going through the wringer during the past couple of years, thanks to the trichotomy of demonetisation, the Real Estate Regulation Act (RERA) and the implementation of the Goods and Services Tax (GST), the real sector is finally getting back on its feet again. Customers and investors are coming back to the market, inventories are steadily reducing, and trust and transparency are growing. This is a good time to boost the growing confidence of the market and provide prospective homebuyers with further encouragement to become first time homeowners.
From this perspective, here are a few expectations from the interim budget:
Paving the path for policy stability
Currently, there is a lot of ambiguity on changes in GST rates and this has put home-buying on a slow track. Greater clarity and stability on the taxation policy through GST, will help the real estate sector in a big way. Bringing stamp duty under the purview of GST would reduce the tax burden on customers. There is also a need for better clarity on definitions such as the recent change in the definition of a completed real estate project to one with an Occupancy Certificate (OC).
Hiking exemption limit on income tax
This is a very populist expectation and hoped for by most salaried individuals and families. Experts expect the limit to be increased from the current ceiling of Rs 2.5 lakh to anywhere between Rs 3 and 3.5 lakh. With the reduced tax burden on households, it will encourage their propensity to save and invest for the long-term. These savings can further be directed towards corpuses for home-buying.
Deduction on the interest payment of housing loans (Section 80C)
The interest component is a huge chunk of the EMIs that homebuyers pay towards the repayment of their home loans. There are expectations from many quarters that the deduction limit on interest paid on home loans will be increased from the current capped limit of Rs 2 lakh. If this expectation becomes a reality, it will be enormously beneficial to the huge chunk of middle class taxpayers who also service home loans. It will also act as a catalyst for many lower middle income families who are looking to become first-time homeowners.
Continued focus on Affordable Housing
Affordable housing was a big winner in 2018 with many more developers embracing schemes such as PMAY-CLSS to woo homebuyers. This bodes well with the PM’s bold vision of ‘Housing for all by 2022’. We expect a continued focus and thrust on affordable and mid-income housing through the extension of the different schemes.
Boosting infrastructure and growth of micro-markets
2018 saw the elevation of many tier-3 cities to tier-2 position, thanks to better infrastructure and improved connectivity. This has also led to the growth of more peripheral business districts and micro-markets which has boosted the real estate sector. More developers are encouraged to venture into these markets with quality and affordable housing. Thus, the interim budget should increase the outlay towards more infrastructure projects which would provide last mile connectivity.
Renewed thrust on Smart Cities
After the enthusiastic initial response to the planning and development of smart cities, the fervour seems to have died down. If India is to grow and be considered equal among the league of global developed nations we need many more Mumbais, Delhis and Bengalurus. This is only possible with an unrelenting and collaborative focus on making our cities and towns smarter, better connected, and resource sustainable.
Making REIT more attractive for investors
2018 saw the launch of the first long-awaited Real Estate Investment Trust (REIT) in India. The ensuing enthusiastic market response from investors reiterated the need for more such trusts. Establishing a few more REITs inject much-needed funding to the recovering real estate market.
With the Lok Sabha polls on the horizon, the interim budget is widely expected to be an expansionary and populist one. We hope that it is bold and pushes the envelope on visionary policies for affordable housing, stable GST rates, and smart cities, while also empowering prospective homebuyers and the real estate sector.
Ashish Mahajan is the founder of PropStory.
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