Below are some of the expectations of the Indian real estate sector from the Union Budget 2017-18:
Encouraging Developers to Build Affordable Housing Projects:
The government may announce several new measures to encourage developers to
build affordable housing projects to fulfill their "Housing for All by 2022" mission. If "housing for
all by 2022" has become a reality, the government will have to provide
tremendous incentives for the real estate sector to make homes more affordable
and produce much faster to meet overall objectives. Currently, there has been
no intervention from the government in terms of land acquisition or land
development costs which remain high.If the government can work towards reducing
pain for these budget housing segments, more relevant housing units will be
built quickly and successfully by private developers. In addition, the government
is required to expand the scope of External
Commercial Borrowing (ECB) for construction finance for a broad range of
housing projects and is not limited to low
cost / affordable housing. Tax benefits should be relaxed further for home
buyers. For the first time all home loans should be revised to include all home
loans up to Rs 3,00,000 including interest and not limited to a value of only
Rs 50 lakh. The government has already announced benefits of home loans to
low-income people by providing a rebate of up to 4 percent on home loans of 12
lakh taken under the Pradhan Mantri AwasYojana.
To grant industry
status to the Indian real estate sector: The demand for granting industry status to the Indian real
estate sector has been pending for some time. Directly or indirectly, the real
estate sector contributes more than 15%
of India's GDP. Developers are forced to borrow at high interest rates in
the absence of industry status. Due to high borrowing costs and
non-availability of funds, construction activities are delayed and hence the
cost of houses increases. Once the status of the industry is given to real
estate, it will become easier to make affordable housing a dream for all. So
far, the affordable housing target is far behind and this can only be achieved
if the sector gets industry status which will help drive housing demand in
India.
Clarity on GST: While the Goods and Services Tax (GST) tax structure has been announced last year, the clarity of GST as to which tax rate will be applied to the real estate sector is still awaited. This will define the way in which the real estate sector will grow in this financial year. A GST clarification will also be required on the abatement scheme and whether credit for input tax will be allowed if the composition scheme is availed by the developers.
Single window clearance for the real
estate sector: Developers have long been demanding for single window
clearance to address delays in government approval. If developers are able to
get all the necessary approvals on time, then they are able to execute their
projects on time and this will also reduce the cost of homes. Therefore, to
avoid unnecessary delays in construction and to reduce the cost of homes,
single window clearance is required.
Need to increase house rent deduction
limit: Salaried individuals receive House Rent Allowance (HRA) as a component of their total salary, and can
therefore claim substantial deductions in cases where the salary and its HRA
component are high. However, a salaried person or a self-employed person
without an HRA component or those making lump sum payment without an HRA
component can only claim a maximum deduction of Rs 5,000 a month under Section
80GG. This budget should address this variation in house rent reduction limits.
To make tax slabs and tax reporting easier:
Government can focus on easing tax reporting structures. In addition, the
benefits of demonetization practice should be extended to the common man
through relaxation of tax slabs and offering higher level of exemption. The
idea is to reduce the actual tax incidence as well as broaden the scope of tax,
with the stated intention of reducing corporate tax.
Apart from the above points, the real estate sector is expecting some more announcements in the Union Budget 2017-18, such as higher tax savings on income tax sups, housing loans and house insurance premiums for first time home buyers and providing clarity on beneficiaries Under the Pradhan Mantri Awas Yojana etc.
