Budget 2022 real estate expectations: The real estate sector saw a strong comeback last year, with home sales in major cities jumping to 90% of pre-covid levels
Budget 2022 Real Estate Expectations: The real estate sector saw a strong comeback last year, with home sales in major cities jumping to 90% of pre-covid levels while newly launched units hit 2019 levels.
In a context of uncertainty about the impact of the third wave of the Covid pandemic induced by Omicron on the real estate activities, the sector has enormous expectations with regard to the next budget.
“The residential sector is looking forward to additional support beyond the main requirements of industry status, ease of finance and reduced GST rates,” said Anuj Puri, Chairman of Anarock Group.
Puri shared that the following decisions, if announced in the upcoming budget, would help boost residential demand:
Rs 5 lakh Home loan deduction limit
Puri said there is a need to increase the tax refund from Rs 2 lakh on home loan interest rates under Section 24 of the Income Tax Act to at least Rs 5 Lakh. This could instantly inject strong demand for housing, especially in the affordable and mid-range categories.
Kanika Gupta Shori, Founder and COO, Square Yards, also said: “Real estate stakeholders want the standard tax deduction of Rs 2 lakh on interest paid on home loans to be raised to Rs 5 lakhs as it will bring more earners into the bracket and help fulfill their dream of buying a house. The move will also keep housing demand healthy and help property developers recover from losses and boost their wafer-thin profit margins.
Deductions for the repayment of the principal of the mortgage, in addition to the existing 80 C
Personal tax relief, either through reduced tax rates or revised tax brackets, would be a welcome move – especially as the latest increase in the deduction cap under Section 80C (to Rs 1 .5 lakh per year) took place in 2014.
Puri said: “The time is certainly ripe for another upward revision, but there is no denying that the government currently lacks the space for such a decision. Instead, it can focus on providing more incentives to struggling MSMEs and SMEs after the pandemic. In addition, public spending on infrastructure could still be boosted.
Redefining the criteria for affordable housing
Currently, affordable housing is defined by the size of the property, its price and the income of the buyer. For example, affordable housing is a unit with a carpeted area of up to 90 m². in non-metropolitan cities and 60 m². in major cities and rated up to Rs 45 lakh for both. The central bank definition, on the other hand, is based on loans granted by banks to individuals for the construction of houses or the purchase of apartments.
Puri said the government should seriously consider revising the per-city pricing parameters to include a wider customer base as part of the benefits of expanding to this segment. While unit sizes as per its definition (60 sqm of carpeted area) are relatively appropriate, unit prices (up to Rs 45 lakh) are unsustainable in most cities. For example, a budget below Rs 45 lakh is far too low for a city like Mumbai. It should be increased to at least Rs 85 lakh.
As with other major cities, the budget range should be increased to at least Rs 60-65 Lakh. With this price revision, more homes will fall into the affordable price, allowing more buyers to take advantage of several benefits like GST rates of less than 1% without ITC, government subsidies and the tax deduction of a total of Rs 3.5 lakh on home loan interest repayment.
Extend Affordable Housing Benefits
According to ANAROCK Research, affordable housing in 2021 was approx. 26% of the overall offer in the first 7 cities. The tax exemption for the ARHC will help avoid labor shortage issues in the event of future disruptions due to the pandemic.
Puri said affordable and rental housing received a big boost in the latest Union budget, with the government extending the additional deduction period of Rs 1.5 lakh for loans until March 31, 2022. Further extension of this benefit will ensure sustained demand for affordable housing. in 2022.
Colliers, a commercial real estate brokerage professional services firm, said the next budget should focus on policies to boost consumer spending and investment.
“Budget 2022 should continue to focus on expansionary policy measures to stimulate consumer spending and investment. Measures to stimulate affordable and middle-income housing in the form of an extension and expansion of the tax benefit for first-time buyers, support measures for developers engaged in affordable housing and rental housing projects will have a positive domino effect on the real estate sector and the overall economy,” said the CEO of Necklaces India, Ramesh Nair.
TDS relief to NRIs
Amit Goyal, CEO of India Sotheby’s International Realty, said the government should reduce TDS on real estate transactions for NRIs and also provide tax penalty relief on the difference between circle rates and deal value properties.
“The difference of more than 10% between the circle rates and the settlement values of the properties results in tax penalties under Section 43CA of the Income Tax Act. The government needs to understand that the difference between the circle fare and the actual price is much higher in some areas of Delhi and other parts of the country. Therefore, the government should consider extending the relief up to 20% of the difference,” Goyal said.
“The other pain point is the withholding tax (TDS) applicable on property transactions for NRIs. It is far too high and should be reduced from the current 28.49% as the refund process takes much longer,” he added.