Budget 2020 – Reforms That Could Boost The Real Estate Sector
Indian Real Estate Sector has been a steady and strong contributor to the GDP of this country. The last two years, however, have witnessed a slowdown in the real estate sector of India. As we await the announcement of Budget 2020, on February 1st, here are some reforms that could potentially boost the real estate sector:
Increased Tax Benefits
Purchasing a property comes with various tax benefits that the owner of the property can avail in India. This has also been a strong reason why people invest in the Real Estate Sector. With the upcoming Budget 2020 announcement, there is a demand to increase these tax benefits that one can avail on the purchase of a property. Satish Magar, President of CREDAI (National), states that an individual is to be allowed an additional deduction of interest on the loan for the acquisition of a first house. The catch here is that the said deduction is only allowed on loans sanctioned between April 1, 2016, and March 31, 2017. Additionally, the loan amount should not exceed Rs. 35 Lakhs and the value of the property should not exceed Rs. 50 Lakhs.
GST Relaxation
Another major demand from various real estate investors and buyers from Budget 2020 is relaxation in GST. For this, the benefit of Input Tax Credit (ITC) be reinstated and GST should be charged at 12%. Furthermore, stamp duty should also be subsumed into the Goods and Services Tax (GST).
Section 43 CA – Amendment or Removal
To increase the sales in the Real Estate Sector, Satish Magar suggests that there is a barrier to the natural price corrector and the stalled project has a cascading effect on home buyers – Section 43 CA of the Income Tax Act. In order to improve sales, this section needs to be reformed, or should be removed.
Stamp Duty Relaxation
According to Niranjan Hiranandani, national president, NAREDCO, “A reduction in stamp duty by 50%, for all real estate transactions registered on or before March 31, 2020, shall induce the fence-sitters to turn into the actual home buyers, thereby, spurring demand and consumption.”
Rental Housing – Proper Support
Less attention has been paid to Rental Housing when it comes to previous budgets. SO, in order to fulfill the vision of ‘Housing for All’ by 2022, it is crucial that in the upcoming Budget 2020, proper attention is paid to providing tax benefits, easy and simpler funding mechanism, availability of loans at lower interest rate, is done along with various policies aimed at the growth of rental housing. If this is done, there is a chance that we shall see a boost in the real estate sector.
Restructuring of Loans
As we await the Budget 2020 to unfold, there is a strong demand from the real estate sector to have a proper restructuring of loans. “Liquidity shortage continues to cause distress in real estate. Hence, a one-time restructuring scheme with moratorium on principal and interest of two years is immediately needed,” CREDAI stated.
Redefine Affordable Housing
When it comes to affordable housing, currently, when a flat has the carpet area up to 90 Square Meters in a non-metropolitan areas and 60 Square-meters in metropolitan areas were considered affordable. Their cost should not increase from Rs.45 Lakhs. However, the real estate sector demands that this should be redefined to homes that cost Rs. 75 Lakhs instead of the current Rs.45 Lakhs. One should keep in mind that affordable housing comes with reduced GST rates and benefits of tax exemptions for such projects.
As the Budget 2020 unfolds, we shall know which reforms are set in place to encourage and boost the Real Estate Sector on February 1st, 2020.