Just like any other year, India’s real estate sector is expecting a great deal from the Union Budget 2023 ─ the last full Budget of the Prime Minister Narendra Modi-led government at the Centre. That makes one wonder about several obvious but important questions.
Does the sector want sometime new from this year’s Budget? Will finance minister Nirmala Sitharaman do one better and spring a happy surprise for the sector? Will the optimism for the year 2023 fade away if the Union Budget yet again ignores the demands of real estate?
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Aditya Kushwaha, CEO & Director, Axis Ecorp, points out that in the last couple of years there has been an increased focus on affordable housing, and rightly so. In Budget 2023, he expects the government should adopt home-owner friendly measures and introduce deep policy reforms that will help accelerate the growth in real estate.
“The last three years have been favourable for buyers of homes. Low loan rates amid the Covid-19 pandemic outbreak and suppressed property prices fuelled increased demand for homes as individuals turned to remote work. The luxury segment has been outperforming and NRIs are keen to invest in India. The government should look at incentivising this growth. In my opinion, the applicable tax deducted at source (TDS) on property transactions for NRIs should be revised. I believe this move will boost investment in the sector and also help the country to build its forex reserves,” says Kushwaha.
Ashish Narain Agarwal, founder and CEO at PropertyPistol.com, feels the sector has been buoyant after the pandemic with pent up demand and increased buyer confidence. The crucial expectations from the government are infrastructure boost in the form of national highways, smart cities, inland waterways development, high speed rails, new airports, multi-modal connectivity and public-private partnership in infrastructure development.
“The finance minister can look at possible tax rebates, augmentation and renewal of existing schemes. The sector can work towards penetration of technology in all the verticals like marketing, advertising, customer engagement, customer relationship and sales among others and the government can ensure the easy and seamless distribution of this technology across all the stakeholders, builders, investors and buyers,” says Agarwal.
Amit Goenka, MD and CEO at Nisus Finance, wants reduction of GST for under construction properties to 1% for all categories.
Reduction in the minimum size of REITs to Rs 50 crore, reduction in LTCG tax to 5%, reduction in Cat 1 special situations funds requirements to Rs 5 crore for sponsor capital and proportionate reduction in fund corpus are some of his other demands from this year’s Budget.
“I don’t agree that there is nothing new for the FM to offer. There are many ideas, but each idea has to be researched by economists and experts and analysed for positive and negative effects. The government should set up stronger, more responsive bodies that will quickly respond to the needs of the sector,” says Goenka. Â
Pradeep Aggarwal, chairman, Signature Global, asserts that the government should reconsider the loss set-off limit under the income tax head house property. Earlier, there was no such limit, but in the Finance Act 2017, the government restricted the amount of loss to up to Rs 2 lakh per year under the head which is allowed to be set-off against income from other sources. This limit should be removed or enhanced to bring back investors in the sector. This will eventually support the rental housing market to meet demand.
“Keeping in view the high inflation and a significant rise in borrowing cost in the last few months, there is an urgent need of tax sops, especially for home buyers in affordable and mid-segment housing, to overcome the financial hardship. I think the government should enhance the deduction limit against interest payment on home loans. For home buyers in the affordable housing segment, entire interest on home should be allowed as a deduction,” says Aggarwal.
To be sure, the leading voices of the sector have moved away from their usual concerns like demanding an industry status or a single-window clearance system to accommodate buyer concerns.
But then, there is not much scope for the FM to grant any leeway to the sector considering the macroeconomic outlook as well as the need to revitalise the economy. At the same time, the last full Budget may goad Sitharaman to announce measures to boost infrastructure development, consequently enabling the real estate sector.
