Budget 2023: Real Estate expects further fiscal stimulus - Dr. Mohit Ramsinghani - Runwal Group

New Delhi (India), January 25: The focus of the government should be to boost real estate sales, says Dr Mohit Ramsinghani, Chief of Sales – Runwal Group.

Like every year, this time Indian budget will be presented on 1st Feb by the finance minister in the parliament, outlining the government's revenue and expenditure for the upcoming fiscal year.

After a long gap of 7-8 years real estate sector is showing signs of recovery. Both residential sales and commercial leasing picked up stemmed from healthy economic growth and a rise in demand. To sustain this recovery in the near and long term, there is a need to put more disposable income in the hands of consumers. The government should consider enhancing the deduction available for home loans from Rs 2 lakh to Rs 5 lakh as per Section 24 (b). Similarly, the limit under Section 80C (to Rs 1.5 lakh a year) should be increased, which has remained unchanged since 2014. There is room to change long-term capital gains tax so that a home buyer who sells a house can be exempted from paying capital gains tax if they use the sale proceeds to buy or build up to three homes. Current rules have this provision for two homes. This will be a small reprieve to prospective home buyers who are bearing the brunt of increased home loan rates promulgated due to the hawkish stance of monetary policy.

The timing for reforms in real estate cannot be better than this time. Domestic buyers want to upgrade to spacious luxury apartments. Thanks to currency depreciation, there is a plethora of interest from the NRI community. They are seriously considering and investing in boutique apartments of 1 and 2 BHK configurations that fetch higher rentals. Developers are responding to the changing needs of all kinds of home buyers by launching customized products with innovative offerings. Relaxations in taxes, a decrease in stamp duty, and a more rationalized GST regime are some of the expectations from Finance Minister Nirmala Sitharaman by the industry.

The government’s focus on giving impetus to affordable housing has ameliorated the impact of the downturn due to the pandemic. In addition to existing efforts government also needs to promote PPP models, which will unlock real value in the real estate sector. Government has funds, and private players have the required expertise and means to deliver affordable housing. This synergy needs to be efficiently utilised to benefit the sector and consumers alike. The success of redevelopment projects under the revenue-sharing model is a good example of this. Micro and macro-organized players are signing up for acquisitions and mergers to take this ahead.

The cost of credit borrowings and lack of more options for funding have added to the woes of Real Estate developers in recent years. Builders take loans from banks, raise finance through private players and get into sharing partnerships. In order to rein in inflation, policy lending rates have been consistently increased for the past 1 year. This lending cost is passed on to builders who are not able to pass it on to consumers. This is kind of a double whammy for consumers who themselves are getting loans at higher rates. Home loan rates offered by banks have been increased by around 2.5 per cent this year. Many big and small real estate players are sitting on the fence, waiting for tangible benefits through improved fiscal stimulus.
The overall impact of the Indian budget on the real estate sector can vary depending on the specific measures that will be announced.

The Budget Session for 2023 will start on January 31, and Nirmala Sitharaman, finance minister, will announce the Union Budget on February 1.