The Union Budget this time would be the last full budget ahead of the General Elections due next year. The real estate sector is yet again parroting the old demands, with the only difference being that the concerns of the home buyers too finds a place in their wish list. The developers have come to realise that the home buyers can no longer be ignored as they are the most necessary in the real estate business cycle.
The government, on the other hand, is conscious of the fact that this is the time to make some long-term political statement with the Union Budget. In the power corridors this budget is being seen as the beginning of the run up to the next General Elections.
Does this dichotomy make the developers’ budget wish list in contrast, if not irrelevant, with the Finance Minister’s cost & benefit analysis with the Union Budget. More importantly, how will the sector weather the headwinds ahead if there are no tangible gains for the sector with this budget.
We asked the industry stakeholders the following questions to understand their budget perspective:
What is your budget wish list for the sector? Any new demands this time around?
Don’t you think there is nothing new for the Finance Minister to offer and the sector too is clueless to come out with any out of the box strategy?
Will the optimism for the year 2023 fade away if the Union Budget yet again ignores the demands of real estate?
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 when workplaces closed. 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 realty sector has been buoyant post the pandemic with pent up demand and increased buyers’ confidence. The crucial expectations from the Government are infrastructure boost in the form of National Highways, National Infrastructure Pipeline (NIP), PM Gati Shakti Master Plan, Smart Cities, Inland Waterways Development, High Speed Rail, construction of Airports, plan to augment Multi Modal Connectivity and Public Private Partnership in Infrastructure development.
“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.
The wish list of Amit Goenka, MD and CEO at Nisus Finance is:
Reduction of GST for under construction properties to 1% for all categories
Reduction in minimum size of REITs to INR 50 crore
Reduction in LTCG tax to 5%
Reduction in Cat 1 special situations funds requirements to INR 5 crore for sponsor capital and proportionate reduction in fund corpus
Launch of new sovereign funds for Mumbai redevelopment
Special incentives for women developers by providing central subsidies on projects with Government land
Special provisions for underwriting of municipal bonds for slum redevelopment by the Finance Ministry
Allowing Overseas Direct Investment for Indian investors and increasing LRS limit to INR 10 crore
“I don’t agree that there is nothing new for the Finance Minister to offer or the sector is clueless to come out with any out of the box strategy. The sector is vibrant and increasingly global in its investor base. 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.
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, Government restricted the amount of loss to up to INR 2 lakh per year under the head House Property 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 high inflation and 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.
In conclusion it could be vouchsafed that though the leading voices of the Indian real estate sector have moved ahead of its usual rhetoric like Industry Status or Single Window Clearance to accommodate the concerns of the home buyers, they still do not seem to be in sync with the ground realities that shape the Union Budget year after year. The sector has also hurt its cause with its narrative of a booming business where ‘All is Well’ for the developers.
There is not much scope for the Finance Minister to grant any leeway to the sector this time around keeping in mind the macroeconomic outlook as well as the need to revitalise the economy. At the same time, the last full Budget may goad the Finance Minister to make certain political statements that could help more to the infrastructure players than the builder community. For the developers, the only silver lining could be whether some of these political statements pave the way for more foreign funds landing into the realty business of India. Fingers are anyway crossed as far as the home buyers’ travails are concerned.
Ravi Sinha
@RaviTrack2Media
Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.
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