Finance Minister Nirmala Sitharaman will present the Union Budget for financial year 2021-22 on February 1 amid the ongoing Covid-19 pandemic which led to the country's economic growth falling by a record 23.9 per cent in first quarter of current financial year. The Budget assumes a greater significance as it will lay out proposals as to how the government plans to revive the economic growth of the country which has fallen to multi-year lows.
In the run-up to the Budget 2021, Motilal Oswal Real Estate has recommended that in order to focus on revival of demand for the real estate sector government should increase eligibility limits on home values for affordable housing benefits from the current Rs. 45 lakh to Rs. 60 lakh.
"In our opinion, the upcoming budget should focus on the revival of demand for real estate. One of the key measures that can be introduced to boost end-user demand would be to increase eligibility limits on home values for affordable housing benefits from the current Rs. 45 lakh to Rs. 60 lakh - this would expand benefits of affordable housing scheme to more homes," Sharad Mittal, Director and CEO of Motilal Oswal Real Estate, said in a note.
Residential real estate witnessed a strong recovery in the current financial year owing to low interest rates, pent-up demand, developer discounts and temporary stamp duty waivers.
"Over the last six months, residential real estate has witnessed a strong recovery wherein almost all top cities are clocking record sales as compared to previous years. Customers and investors who had stayed away from residential real estate over the last 4 to 5 years are returning to the sector. Return of this lost demand is imperative to the revival of residential real estate, which has been going through several challenges over the last 4 to 5 years due to a spate of regulatory reforms and funding crises," Mr Mittal added.
He also suggests that the government should incentivize individuals to invest in real estate by providing tax sops.
"Till 2017, the entire loss from deemed let out properties (second homes and thereafter) could be adjusted with income from all sources. This incentivized several individuals to invest in real estate from a tax planning perspective. Restricting this limit to Rs. 2 lakh in the 2017 Budget created a drop in investor demand. Removing this limit in the upcoming Budget would go a long way in bringing back lost investor demand," Mr Mittal said.