Realty industry expects booster shot in the 2021-22 union budget

 

The realty sector, which is struggling to recover from the COVID-19 pandemic and the subsequent economic slowdown, expects a booster shot in the annual budget for 2021-22 to be presented by Finance Minister Nirmala Sitharaman on Monday. The government is expected to provide more support on the tax front, including a Goods and Services Tax (GST) waiver for homes under construction given its backward-forward linkage in the economy, especially in the affordable segment.

National Real Estate Development Council (NAREDCO) Maharashtra President Ashok Mohanani said both developers and buyers hope for reforms like tax sops and correction in prices, which will further benefit and stabilise the industry. “The industry expects if 1% GST for affordable housing can be extended for another fiscal along with the removal of Rs 45 lakh cap, it will surely be a great deal for the affordable housing segment. From the perspective of first-time home buyers, we expect the full benefit of interest to taxpayers should be provided. Re-introduction of GST with input tax credit on under construction properties will generate the demand amongst homebuyers,” he noted.

Apart from the extension of the current benefits, HDFC Securities, in its research report, expects relaxation in registration charges, lower stamp duties and easing income tax norms might also augment the housing sales across the country. Increased allocation for Pradhan Mantri Awas Yojana (Urban), extension for the PMAY’s credit linked subsidy scheme for middle income group till March 2022, extension of tax holiday for affordable housing projects till March, 2022, increasing limit of rebate on housing loan interest rates under section 24 of the IT Act will help as well.

Tax benefits to the industry will go a long way in enabling developers to complete ongoing projects (affordable housing), thereby helping deal liquidity crunch. All or some of these will help the sector to recover from the ill effects of the slowdown/pandemic.

Further, Sharekhan expects that the rebate of Rs 2 lakh on housing loan interests under section 24 of the IT Act may be increased to at least Rs 5 lakh. Additional tax benefit of Rs 1.5 lakh available under section 80 EEA for purchase of affordable homes between April 1, 2019, and March 31, 2020, may be extended for buying. These are expected to further improve the demand environment.

According to CARE Ratings, the industry expects the government to revise the circle rate in order to bridge the gap between the agreement value or extend the deadline to stimulate demand on a pan India basis. Further, the government may extend the deadline and the benefits of increasing the differential between agreement value and circle rate from 10% to 20% to other realty segments such as residential units priced above Rs 2 crore and commercial spaces. At present, it is only applicable for the primary sale of residential units of value up to Rs 2 crore.