There is the usual slew of asks that the real estate sector has from the upcoming Union Budget - including grant of industry status and opening up of single-window clearances for residential projects. However, this year, the realty sector is also desperate for the recently-announced alternative investment funds (AIF) - which intend to get stuck housing projects going again - to be deployed quickly.
Other expectations from Union Budget 2020-21 include an increase in the tax rebate of Rs 2 lakh applicable to the interest paid on home loans under Section 24 of the I-T Act. This alone could give some forward momentum to housing demand, especially in the affordable housing category. On the taxation front, another hope is that the Budget will give some relief on personal taxes. This could be in the form of lower tax rates or in a revision of personal tax slabs. This has, in fact, not been done since 2014 and revisiting tax slabs seems overdue.
The realty sector also hopes that input tax credit (ITC) benefits related to GST on under-construction homes will be provided. Though the GST rate on under-construction homes has come down to 5 per cent, the previously provided ITC benefit is no longer available. This results in capital-strapped builders' inability to avail tax benefits on the purchase of construction materials and increased prices for customers. Restoring the ITC benefits would, therefore, help bring down property prices and increase demand for under-construction housing.
As far as the Rs 25,000-crore AIF is concerned, the sector is rapidly running out of time. These funds need to deployed urgently so that aggrieved buyers in stuck projects can get relief.
The budget also needs to do something about the liquidity crunch which is impacting not only real estate but also other industries. In the real estate sector, the main fallout of lack of liquidity is project delays, which is the main reason for severely reduced demand for under-construction homes. Increasing liquidity for the sector will help increase the supply of ready-to-move homes.
The real estate sector also needs faster deployment of major infrastructure undertakings which make more areas liveable, and the government must also take a hard look at overdue land reforms. The new lower 15 per cent tax rate for companies looking to set up new factories can be applied only if they can easily acquire land. The implementation of unique identity numbers (UIDs) for land would help upgrade the country's obsolete land records system as well as attract more foreign investors and also limber up the approval procedure for real estate projects.
(Anuj Puri is Chairman of ANAROCK Property Consultants)
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