Budget 2020: Expectations Of The Real Estate Sector

The Union Budget for 2020-21 is all set to be presented on Saturday, February 1, 2020. Real Estate being a major contributor to the Indian economy, the industry expects a progressive proposal from this government to revive the sector. While the sector undertakes positive measures to strengthen the real estate sector, a much-needed impetus from the Union Budget 2020 will go a long way in changing the fortunes of the sector. In the upcoming budget, the industry has a series of recommendations, some of them are as follows:

• Hike the Rs 2 lakh tax exemption limit on home loan interest rates under Section 24 of the Income Tax Act - This will increase the demand for housing, especially in the affordable and mid-segment categories.

• The government should revise the deduction limit under Section 80C. In 2014, the limit had been enhanced to Rs 1.5 lakh. However, it is likely to put more burden on the exchequer, it is expected to boost the purchasing power of home buyers.

• Include ITC benefit in GST for under-construction properties - While the GST rate for under-construction flats was reduced from the present 12 per cent to 5 per cent, the previous ITC benefit was shelved. Already cash-starved developers of residential projects cannot claim the tax benefit on the raw materials that form a part of any construction project and the increased costs are passed on to home buyers. ITC benefits will reduce the prices of properties and thus, make under-construction properties attractive again.

• Immediate deployment of INR 25K crore to ease the liquidity situation - Realty developers are currently facing a huge cash crunch. Therefore, to complete stalled housing projects, the allotted stress funds needs to be utilized. The government should ensure that the allotted fund is disbursed to the identified stalled residential projects quickly and in a transparent manner. Completion of stalled projects will improve homebuyer sentiment and boost the housing demand.

• Ease liquidity - The ongoing liquidity crunch faced by non-banking financial companies (NBFCs) and housing finance companies (HFCs) has a cascading impact many industries, including real estate. Sentiments among real estate sector’s stakeholders have only worsened due to the heavily delayed and terminally stuck housing projects. Easing liquidity will increase credit flow for real estate developers and boost the demand of ready-to-move-in properties. 

• More incentives for private sector investments in affordable housing — Despite the benefit of infrastructure status, real estate developers in India are still not able to get proper funding from major banks and NBFCs at lower interest rates. Lack of funding from bankers and private equity investors has also led developers staying away from building low-cost housing projects.

• Implementation of UID for land: In order to bring transparency and organise India’s outdated land record system, Unique identity numbers or UIDs is the need of the hour. With the help of land records digitisation, it will attract more foreign investors for whom lack of proper land titles is a major obstacle for investing in the Indian real estate.