The Indian real estate market has seen a strong rebound in 2022, and so, in order to sustain the momentum, the industry is looking forward to additional reforms and incentives in the upcoming Union Budget 2023.
This year, the real estate industry’s demands go beyond the usual expectations of single-window clearance and industry status.
Here’s what the real estate industry expects from Union Budget 2023.
Shishir Baijal, chairman & managing director, Knight Frank India has called for increasing the home loan interest deduction limit under Section 24 of the Income-tax Act, 1961 to Rs 5 lakh from the existing Rs 2 lakh per annum.
“Section 24 currently allows for a deduction of Rs 2 lakh on housing loan interest. This needs to be extended to Rs 5 lakh to boost affordability and housing sales,” he says.
Ramani Sastri, chairman & managing director, Sterling Developers Pvt. Ltd has echoed similar sentiments and said that there is an express need for more tax sops for homebuyers as well as investors.
“There has been a rise in inflation in all these years. Hence, the government should raise the deduction limit for interest payment on home loans from the existing Rs 2 lakh a year to Rs 5 lakh, which will add momentum to housing demand, particularly in the affordable segment,” he says.
Sastri also asked for capital gains tax rate to be reduced from the existing 20 per cent, adding that the Rs 2 crore cap on capital gains for reinvesting in two properties should also be removed. He added that the relaxation of capital gains criteria will support homebuyers as well as improve affordability.
Baijal further said that the existing stipulation under Section 54 of the Income-tax Act, 1961, which allows for claiming long-term capital gains (LTCG) from sales of an existing house only if the construction of the property is completed within three years of the sale of the earlier house, should also be relooked in view of the increased timelines in construction nowadays.
“Residential projects are continuously increasing in scale in terms of the number of units, height, and amenities, which leads to completion timelines in excess of three years. While the implementation of RERA has improved the situation, the completion timelines of under-construction projects frequently exceed deadlines. This causes significant hindrances to homebuyers in setting-off capital gains in under-construction properties,” he says.
He also made another recommendation calling for reintroduction of the Section 80IBA registration timeline for affordable housing projects.
“The 100 per cent tax holiday for affordable housing projects under Section 80IBA was available for projects which are approved till March 31, 2022. This section allowed developers to claim 100 per cent tax exemption on profits subject to several qualification criteria, including the approval deadline. Since this is arguably the most materially meaningful measure to boost the viability of affordable housing projects, we believe it is important to revive this measure once again,” Baijal adds.
Harsh Vardhan Patodia, president, Confederation of Real Estate Developers’ Association of India (Credia) said that their recommendations are focused on sustaining the current growth in the sector, boosting demand, and exemptions for homebuyers.
He said the real estate sector can add millions of livelihoods in a short time and significantly contribute to the country’s gross domestic product (GDP). Continuous rate hikes may cause short-term turbulence in overall housing demand, adding to buyers’ overall acquisition cost at a time when buyers are optimistic about making decisions.
“The sector has begun to gradually recover across key property markets, primarily driven by end-users; however, repeated rate hikes may have an impact on the interest-sensitive sector. The sector’s growth will directly fuel the growth of all ancillary industries, thereby creating a cascading effect on job creation and economic development,” says Patodia.