New Delhi, January 07, 2023: With General Elections coming up in the next 16-18 months, it is clear the upcoming budget will not aim to make big tickets or any radical changes and reforms. Instead, the government will continue its focus on capital expenditure to grow the economy and not rattle voters in a pre-election year. Apart from the General Election in 2024, a number of states too are expected to go for elections in the coming month. Rising interest rates and fuel prices have already hit the economic sentiments. Overall, the real estate sector has shown great resilience in the last few years mainly on account of concessions from the state governments by reducing the stamp duty rate. However, the realty sector, which accounts for a major share in creation of jobs, has been looking at the government for concessions in the upcoming Union Budget.
For developers focused on redevelopment projects, the double GST payment has been a major deterrent as it has led to a cost escalation at a time when margins are already under pressure. This holds true in Mumbai and MMR where several local and reputed developers are engaged in the redevelopment of old and dilapidated buildings. The developer pays the GST firstly on cost of construction without input tax credit, and secondly, when the area is delivered to existing residents at market price. Both GST payments are absorbed by a developer, which often becomes a huge cost for them. Real estate industry has seen disruption during the Covid-19 pandemic in the last two years with increasing costs, falling revenues and other problems such as labour shortage. Hence, the Finance Minister should reverse the decision on GST payment of 5% in order to give a fillip to redevelopment projects.
Besides, enhanced tax concessions on income from renting of housing properties and removal of taxation on notional rental income can further boost demand for new properties. To improve access to housing in the low-to-mid-income segments, the finance minister should continue its focus on the budgetary and extra-budgetary allotment to PMAY schemes. The government needs to ramp up budgetary allocation in the forthcoming budget to meet the target of 50 million dwelling units under PMAY.
Several small-to-medium-sized players are facing challenges in terms of reduced cash flows and credit availability. Any decision to further augment the budgetary allocation for the SWAMIH fund will support completion of the large stalled real estate projects in the country.The finance minister should consider taking steps towards streamlining the insolvency process to achieve faster adoption and resolution plans, which will be beneficial to both lenders and homebuyers in stuck projects.
The Budget should offer a degree of personal tax relief, either by way of lower tax rates or by readjusting tax slabs. Doing so would also help boost housing absorption. The last increase in the deduction limit under Section 80C (to INR 1.5 lakh a year) was in 2014. For encouraging salaried employees to invest in residential homes, the finance minister should consider increasing the standard deduction on home loans to Rs 5 lakhs, and should also increase the standard deduction from 30% to 50%.
Corporate Comm India (CCI Newswire)