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With India battling the world’s second-highest Coronavirus caseload after the US, the Union Budget 2021-22 provided for a boost in healthcare expenditure in India by 135%. Finance minister Nirmala Sitharaman, who presented the Budget on February 1, 2021, however, fell short of giving a similar treatment to the country’s real estate sector, which employs the largest number of unskilled workers. As the government played a tough balancing act between, providing an impetus to demand and keeping a watch on the fiscal deficit, it failed to meet many of the demands of the sector, especially some long-standing ones.
Budget 2021: What did real estate gain?
Surendra Hiranandani, chairman and MD, House of Hiranandani, while terming the Budget as ‘visionary’ and ‘growth-focussed’, adds that real estate has not got anything directly from it, even though some moves would indirectly help the sector. The affordable housing segment received some direct support in Budget 2021, with the government extending the benefits under Section 80EEA and Section 80IBA for another year, till March 31, 2022. While the first section is for the benefit of first-time home buyers, the second is for the benefit of builders of affordable housing projects.
Budget 2021: Measures that the FM ignored
“While affordable housing continued to remain a priority area for the government with a few additional reforms, the government could have given a further boost to real estate, which fuels the Indian economy, as it is the second-largest employer after agriculture and supports over 250 allied industries. There have been many pressing concerns in the real sector that have not been addressed, such as easing liquidity, reduction in levies/taxes, tax deductions on home loans to give impetus to buyer sentiment, granting of industry status to the overall real estate sector and implementation of single-window clearance, among others,” he said.
“The government could have done more to alleviate some of the pandemic-inflicted pains for the industry. The pandemic has dealt a heavy blow to the industry and short-term, easy financing solutions for the developers, could have made the deal sweeter,” says Yash Miglani, MD, Migsun Group.
Industry status for real estate and single-window clearance
According to Amit Modi, director, ABA Corp and president-elect, CREDAI Western UP, the FM could easily have provided an industry status to the sector, while also launching a single-window clearance system, to enhance ease of doing business for the builder community. He is also of the view that the FM should have increased the overall tax deduction limit for all categories of home buyers. “We feel that the inclusion of such ‘low-hanging fruits’ would really have brought the much-needed positive push that the sector was expecting,” says Modi.
Tax benefits on property purchase and home loans
Developers who hoped that the government would rationalise the tax burden on property owners, to make the purchase of second homes more lucrative, are also a dejected lot. Lindsay Bernard Rodrigues, co-founder and director of Bennet & Bernard Group, which is primarily known for luxury holiday homes in Goa, adds: “Indian real estate is the most taxed sector, with a combination of high direct and indirect taxes, stamp duties and levies for development approvals. This has been crippling growth. A key expectation was the restoration of income tax benefit on second homes, which would have benefitted home buyers in a big way and stimulated the real estate sector.”
Under Section 24 of the Income Tax Act, home buyers can claim an annual tax benefit of Rs 2 lakhs every year, for the payment of the interest component on home loans. In their pre-Budget wish-list, most developers opined that the government must extend this limit to at least Rs 4 lakhs in a year. They were also of the opinion that the overall deduction limit under Section 80C (which includes repayment of home loan principal, among other saving instruments) be increased from Rs 1.50 lakhs to at least Rs 5 lakhs.
Rationalisation of GST rates
Developers were also expecting some rationalisation in the Goods and Services Tax (GST) rates. “It was important to bring back the input tax credit as part of the GST reforms and lower the rates for purchase of raw materials. This would have helped reduce the cost of construction. A waiver of GST on under-construction projects could also have boosted demand in real estate,” says Rodrigues.
Even though Sitharaman, in her Budget speech, said every possible step would be taken to smoothen the GST structure further, she fell short of describing the specific areas. Vikas Garg, deputy MD, MRG World, maintains that some clarity on the input tax credit would have made matters better for the industry. According to him, the prevalent economic situation, makes it almost impossible for real estate developers to deliver projects on time amid the monetary pressure that is being further stoked by the demand slowdown in the aftermath of the COVID-19 pandemic.
Changes in the income tax slabs
Also, considering that the new tax regime launched in the Union Budget 2020 did not find many takers, sector experts also widely expected the government to make certain changes in the income tax slabs. However, the FM chose to skip making any changes on that front.
Budget 2019: Home buyers welcome focus on affordable housing but rue lack of other incentives
By: Vibha Singh
July 5, 2019: The Union Budget 2019-20 presented by Nirmala Sitharaman, touched upon various sectors of the Indian economy. Housing.com News spoke to a few property buyers, to gauge whether they felt there was anything in it for the real estate market
Lifestyle and fitness coach, Mumbai
No major changes have been brought in the budget. The only plus point, is that there will be no income tax up to Rs 5 lakhs income. The focus is on affordable housing. We were expecting more tax benefits and some relief on GST, as we have been delaying our property purchase, due to these reasons.
Neeru Miglani Sahota
Media consultant, Delhi
This was a good budget, keeping in view the common man. Some provisions, like the rebate in home loans, will help first-time buyers in the affordable housing category. However, for people who are facing delays in possession of their flats, no provision has been made in the budget to expedite the process.
Management consultant, Ahmedabad
For people looking to buy a house under the different government schemes, the increase in the limit of carpet area to 90 sq metres in non-metropolitan regions is good, as buyers will get more space in this category. So, many people will be attracted towards these schemes now.
General practitioner, Bengaluru
My priority, while purchasing a house in a locality, would be the infrastructure. In the city, you do not have many housing projects that give you good amenities but good projects are coming up along the outskirts. If the locality has good connectivity, then people will not have any issue, shifting to these places. The problem with most cities, is bad infrastructure. It is good that the government is focusing on infrastructure development and for that, they have made many provisions, so that people can get all the facilities – whether it is roads or water.
Abdul Rahman Janoo
Product manager, Hyderabad
I am happy with the announcement about the Model Tenancy Law in Budget 2019, which is much needed for the city. There are a lot of problems arising, because of old buildings that are occupied by tenants, who have been staying there for many years and paying the same rent.
Sonali Biju Raghvan
Entrepreneur, Sonali Home Treats, Kochi
The government has taken a good step, by hiking the income tax limit to Rs 5 lakhs, as this will increase the capacity of people to buy a home. Now, small entrepreneurs and the salaried class, will have more surplus money.