Despite record-high inflation, an increase in consumer demand continues to fuel the growth of the real estate sector. Ahead of the interim budget, realty companies are anticipating various measures that could further bolster the growth of the sector.
Tax Relief
One of the major anticipations by the real estate industry is the tax relief that could potentially increase demand and opportunities in the housing market. "Enacting policies to enhance tax deductions for home loans, reduce long-term capital gains tax on property investments, and address affordable housing is essential. The budget should simplify tax rates, minimise administrative barriers, and focus on personal tax relief by revisiting tax slabs and increasing the deduction limit under Section 80C. Revised income tax slabs can benefit the real estate sector by reducing overall tax expenditure and attracting new buyers through expanded income tax deductions. Developers expect input tax credits, reduced stamp duty, and registration costs to lower project expenses," says Sunil Pareek, executive director, Assetz Property Group.
Reflecting on the same, Anshuman Magazine, chairman and CEO, India, Southeast Asia, Middle East & Africa, CBRE, opines that pivotal changes to the taxation framework and policy reform could further propel sustainable growth. "We advocate the urgency to raise the interest deduction limit under Section 24B on housing loans to a minimum of ₹5 lakh per annum, considering the limit has not been indexed to inflation for a long time," says Magazine.
Magazine also advocates for the introduction of tax incentives under Section 80c for investors in real estate investment trusts (REITs) that would enable REITs to emerge as an attractive tax-saving instrument that would further encourage prospective investors.
According to Ramani Sastri, chairman and MD, Sterling Developers Pvt Ltd, an increase in the deduction limit for interest payment on home loans from existing ₹2 lakh per year to ₹5 lakh per year will potentially add momentum to housing demand, reducing GST reduction on under-construction properties and effect adjustments in raw material pricing. "For a large section of the population, affordability remains the biggest challenge and hence there should also be expansion in the definition of affordable housing as this would expand the benefits for homebuyers and hence boost the end-user demand. Any tax exemption from rental income will also encourage greater investment in residential real estate," says Sastri.
"The budget should offer a degree of personal tax relief, either by ways of lower tax rates or by readjusting tax slabs, which is the need of the hour. There is a strong case for interest subsidy to first-time homebuyers as this will boost sales in the real estate sector. There is a specific need for income tax relief on a second home and positive measures with regard to long-term capital gains rationalisation, which will benefit home buyers in a big way and also stimulate the real estate sector," he adds.
Rationalisation of GST
The real estate sector also anticipates rationalisation of GST ahead of the interim budget. According to Sterling Developers’ Sastri, a moderate reduction in the real estate sector “would make homes more affordable and spark demand.” “We also expect the maximum tax rate of 30 per cent to be reduced to improve the individual's buying power,” says Sastri.
Meanwhile, Pavan Kumar, founder & CEO, White Lotus Group, says that reducing the GST on materials such as cement and marble from the existing 28% will significantly impact the cost of homes. “Aligning incentives for sustainability with industry status and GST revisions will undoubtedly accelerate the path to building India with the biggest infrastructure in the next 5 years,” says Kumar.
Ramesh Nair, CEO, Mindspace Business Parks REIT, anticipates an amendment to the CGST Act that will enable real estate players to avail input credit during the construction phase, which will aid in reducing costs.
Green Realty
The industry is also anticipating measures that could promote sustainable real estate. Sterling’s Sastri says, “I anticipate the budget to have ample provisions and tax reforms for energy transitions by focusing on green real estate and infrastructure, promoting affordable and sustainable housing, and easing the means to do business for commercial property developers,” says Sastri.
Aman Gupta, Director, RPS, urges the government to promote green and sustainable real estate. “Green realty can become mainstream only when there are concentrated efforts to support innovations and faster adoption of technologies,” says Gupta.
White Lotus Group’s Kumar advocates the government to prioritise initiatives that promote green infrastructure with a strong emphasis on zero-carbon emissions.
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