The real estate sector which has been quite dull for the past two to three years is pinning hope that there would be some relief announced in the Union Budget.
The real estate sector has been the second biggest employer for India after agriculture, and market estimates suggest that it will grow by as much as 30 percent in the next decade.
Consequently, the stakeholders have high expectation from this year's Union Budget.
The real estate sector, the builders, developers and investors included are all hoping that the Budget will give the sector a much-needed push, coming as it were, just a few months after demonetisation was announced.
Kishor Pate, Chairman and Managing Director, Amit Enterprises Housing Ltd. said as of now, the tax deduction limit for home loans is just Rs. two lakh, which becomes insignificant when one takes into account the high prices of properties in the larger cities.
Here is the wish list of the real estate sector for the Union Budget and the changes that the industry and its stakeholders are unanimously looking forward to.
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The first on its list is income tax relaxation.
"In Mumbai, for instance, the standard housing price is Rs. one crore, so the current tax deduction limit is insignificant for homebuyers in the financial capital. Apart from extending the tax exemption for home loans to at least five lakh, the budget should also introduce concessions on insurance premiums to encourage buyers insure their property," he added.
The real estate wants a clarification on the beneficiaries included under Pradhan Mantri Awas Yojana (PMAY).
According to a recent announcement by the Union Government, a three percent interest rate is applicable for loans up to Rs. 12 lakh and four percent up to Rs. nine lakh, as per the PMAY scheme.
"The scheme also states that two new income categories have been added to avail higher loan amounts with higher subsidies. We look forward to further clarifications on the definition of these beneficiaries," Pate said.
The third in the wish list includes an increase in House Rent Allowance (HRA) deductions for the self employed.
Pate said the salaried individuals already get HRA as a component of their income and can also claim deductions on it.
"However, self-employed individuals are limited to only Rs. 2,000 as a maximum deduction on HRA as per the provisions of Section 80GG. The 2017-18 Union Budget should address this dichotomy," he added.
The real sector wishes that the Union Budget aims to standardize construction materials.
Pate pointed out that a major reason for increasing home prices is the constantly escalating cost of construction materials like cement and steel.
"Standardization of such materials can help reach tax clarity and also make real estate a viable opportunity for investment," he added.
A single window clearance for real estate projects is what the sector is looking forward to.
"As per the usual process, real estate projects need to go through a long line of approvals and this bureaucratic process has been resulting in delayed deliveries. Single window clearances have been a long-awaited step to reduce these bureaucratic setbacks. Once in place, it can give a major boost to the market," Pate said.
A simpler tax norm of the Real Estate Investment Trust (REIT) is another thing the sector is expecting from this year's Union Budget.
Pate stated that until today, the real estate sector has not benefited from any REIT listings, with the model in its current format still weighed down with multiple taxes.
"Taxation for REITs needs to be simplified to allow developers and investors to benefit from REIT listings. It is necessary that the Union Budget 2017-18 recognizes the importance of REITs and provides lower taxation on REIT income, reduction/removal of service tax with leased premises and waiving capital gains during transfer of property to REIT," he added.
The real estate sector also looks forward to a better clarity on the Goods and Services Tax (GST).
Although the GST (Goods and Services Tax) structure has been declared, the stakeholders are eagerly waiting to understand the rates applicable to the real estate / construction industry.
"We seek clarifications on abatement schemes, and scenarios when developers use composition schemes and the resultant credit for input tax," Pate said.
The real sector also looks forward to financial protection with project delays.
Currently, the interest deductions associated with self-owned homes has been limited at Rs. two lakh. However, for projects under construction, the deductions applicable are just Rs. 30,000. Further, the applicable period for the interest is three years, starting from the year that the loan was approved. This has proved to be a hardship for property buyers and investors.
Pate said the Union Budget should focus on further interest deductions in late deliveries and also amend the period of repayment from the year the possession was due.
The overall sentiment in the realty sector may be low, but hopes are high as far as the expectations from this year's Union Budget are concerned.
After being dealt with a severe blow in the form of demonetisation, the sector is not only awaiting a more transparent and organised system, but also a slew of sops and largesse from Union Finance Minister Arun Jaitley on February 1.