Cess waivers, tax sops: Real estate’s wishlist for Union Budget 2022

Despite the pandemic’s prolonged and unpredictable onslaught, the real estate sector in India has not only shown impressive resilience but proved that it is anti-fragile.

Intimidated initially during the first few phases of lockdowns, the sector was quick to recover as the pandemic made people understand the importance of owning a home even more. 

In fact, according to NoBroker’s annual real estate report, 16 percent of people surveyed indicated that they are looking to buy a home for investment. Which means not only that the purchase sentiment for end use is still strong and but also that investors are back in the market.

While banks have done their bit by cutting interest rates, the upcoming Budget can catalyse this recovery by introducing a few more incentives. 

Discount on registration charges

If registration charges could be discounted for a limited period of time (like it was done for stamp duty in Maharashtra) the fence sitters could be lured to take the plunge.

Charges like these look like additional cost and interfere with the budget of a homebuyer. Many a times, first time buyers don’t even keep these charges in consideration. Reducing them for a set period could really add momentum in the buy/sell space.

Need to relook at the definition of affordable housing 

While standardisation of sizes in the affordable housing segment can work across cities, standardisation of its prices cannot. What can be afforded in INR 45 lakhs in Lucknow will be much better than what can be afforded in Hyderabad or Delhi in the same amount.

To address this disparity, Budget 2022 could redefine affordable housing in a city specific manner to make it pocket-friendly for all segments of buyers across the country. This move will act as a fillip for the real estate sector and attract more end-users. 

Make Affordable Housing more attractive

Many home-buyers remain stranded with housing projects that are stalled for months. The government introduced the SWAMIH (Special Window for Affordable & Mid-Income Housing) scheme to provide affordable and middle-income housing projects with last-mile funding.

The scheme has provided some respite to beleaguered home-buyers, and it should be continued with more infusion of funds so that more housing projects that are currently in limbo can be completed. 

Single window clearance

This has been a long-standing ask. The absence of a single-window clearance has resulted in delivery delays. However, if builders can get compliances approved through a single window, it would drastically help them mitigate construction costs and complete their projects on time. 

Cess waivers for builders

Construction and labor costs have rocketed in the past few months due to the spike in commodity prices. Builders are paying more to finish their projects, and the increased burden will eventually be on the shoulders of the end-user (home buyer).

Reducing GST and bringing down the input tax to 5 percent or help builders with input tax credit could ease this load.  

Identify Real Estate as an Investment Class

As per the NoBroker report, 16 percent of the people surveyed are keen on investing in property, a noticeable jump from last year’s percent . Moreover, 76 percent of them still consider real estate the best investment choice, compared to other options like SIP/stocks, gold, and cryptocurrency.

This sentiment can be further cemented if the government makes real estate an investment class and offer tax benefits to buyers purchasing a second home. They must revise the standard deduction of 30 percent on net rental income as it will boost the interest of investors and attract them to put more money in this sector. 

Time bound reduction in stamp duty across cities

With an aim to promote affordable housing, Karnataka Government had lowered the stamp duty to three percent from five percent for the first registration of apartments valued between Rs 35 lakh and Rs 45 lakh in the last year’s budget.

Maharashtra saw phenomenal result by reducing stamp duty. This move if followed across the country, can create positive sentiments for the buyers and push several fence-sitters. In fact, it should be implemented for mid segment and luxury housing as well.

Benefits For Tenants 

A lot of companies have returned to work from home in the wake of the Omicron outbreak. Given this trend, the government can increase HRA benefits to boost the rental segment.

Tax Sops 

A large chunk of investments with an upper limit of Rs 1.5 lakh currently qualify for deductions under Section 80C. If the government can extend this limit, it will undoubtedly attract more investments.

Moreover, if the Budget creates a separate section for deduction of loan repayment, it would ensure more seamlessness and thus increase demand in the sector.

Furthermore, if the government can increase the ceiling limit for deduction of interest on housing loans under Section 24 (B) to Rs 10 lakh, it would significantly help incentivise buyers and attract more investments in the long term. 

The real estate sector has already recovered remarkably even during the pandemic, thanks to various laudable initiatives taken by the government and the banking institutions. However, if the aforementioned suggestions are taken into consideration, it would help this sector to not only rebound but also grow at an accelerated pace.