Real Estate Sector has high expectations from Budget 2017-18

Aamir H Kaki 

The real estate sector in India has been facing challenging times over the last few years and the recent demonetisation move has added to its woes. The sector needs a real boost and support to recover and revive its demand in the market. Keeping in mind all these things, the real estate industry has high expectations and is hoping for added confidence boosting measures in the upcoming Union Budget 2017-18, to be announced by the Finance Minister Arun Jaitley on February 1.

Stakeholders of the real estate sector are demanding that the government provide more favourable taxation measures, clarity on GST (Goods and Services Tax), relaxation in income tax rate, raising the House Rent Allowance (HRA), simplified tax norms for REITs, introduction of single window clearance for projects, in order to uplift the real estate industry, which contributes – directly or indirectly - over 15% to the country’s GDP.

The Dollar Business presents some of the major expectations that key stakeholders of the real estate industry have from the upcoming Budget:

1. R.K. Arora, Chairman, Supertech Ltd: 

“We expect Budget 2017 to streamline taxation structure of the country by successfully rolling out GST. GST is expected to lessen the tax burden on developers on input items such as cement and steel by removing multiple layers of taxation and instituting the tax credit system. That said, the actual merit or demerit of GST will only be known when the final rates are set. By simplifying taxes, the new uniform tax regime will bring the much needed clarity in how taxes are levied while eliminating instances of double taxation. Once passed on to the buyers, these benefits will result in lower cost of property.

We also expect the budget to give further boost to the system of single window clearance so that projects are completed on time. Generally, projects get stuck for 1-2 years due to approvals. In my opinion, this year’s budget should also give industry status to the real estate sector which will help us in accessing funds at lower rates from financial institutions, the benefits of which can be passed on to the end customers.” 

2. Dharmesh Jain, President, MCHI-CREDAI and CMD, Nirmal Lifestyle:

“For starters, we expect Budget 2017 to be a big stimulant for the real estate sector, considering the direct impact of demonetisation and indirect impact of dormant market sentiments. Post radical financial reforms, tax reforms and rationalisation are the need of the hour and will act as confidence boosters if tax deduction limits are substantially raised under Section 80C for first time home buyers, which is currently insufficient. Separate deduction for principal component of home loan will certainly boost the sentiments, which is currently clubbed with other instruments under Section 80 C which are primarily small savings and insurance driven. 

Under Section 24D, interest rate is capped at Rs.2 lakhs which is insufficient and should be raised to at least Rs.5 lakhs for first five years as interest component is very high during this period. Alternatively, home buyers should be able to claim full rebate under 24D for loan against property value of Rs.50 lakhs. As for Section 54 F, exemptions from Capital Gains in case of investment in residential house, the 2014 Finance Act amended the section 54F to restrict the exemption only for investment in one residential house within India. Why restrict the exemption to one? This restriction results into undue hardship to assessees even in cases where the investment is genuine. Amendment in this section will encourage home buyers to invest in the real estate and increase the demand and will also enable industry to crystallise the vision of Government of ‘Housing for All’ by 2022.” 

3. Rohit Poddar, Managing Director, Poddar Housing and Development Ltd: 

“The real estate sector needs support from the Government for its revival as a lot of employment is generated from this sector and also several core manufacturing sectors depend on a robust real estate sector for their survival and growth. The last three years have been especially challenging for this sector and just when a great monsoon was beginning to bring about some semblance of revival in the economy, demonetisation put a spanner in it. Hence several steps are recommended for the Government’s intervention such as:

•          Declaring infrastructure status on the affordable housing sector. Increasing the tax free status for affordable housing projects to a total period of 10 years post approvals before 2019;
•          Expanding the PMAY (Pradhan Mantri Awas Yojana) scheme to all regions including those outside the municipal limits where a lot of the affordable housing units are coming up;
•          Operationalise the interest subvention scheme of 3% and 4%;
•          Reducing taxes on input costs for affordable housing where input taxes are as high as 34%;
•          Reducing MAT to 12.5% and reducing corporate tax to 25%.

These are a few of the fundamental budgetary support issues which we would like the Ministry of Finance to seriously consider.”

 4. Shubika Bilkha, Business Head, Real Estate Management Institute (REMI):  

“Given the impact that the recent demonetisation initiative has had on the sector, as well as the impact of increased regulatory vigilance, the real estate industry is hoping for added confidence boosting measures in this year’s budget. With its significant contribution to GDP and overall employment in the country, the sector has also long awaited 'industry status' that it remains hopeful for in this year’s budget. To meet the stipulation of timely delivery of projects under RERA 2016, the need for the introduction of a single window clearance has never been more heightened.  

Additionally, with the regulations under RERA 2016 reducing the opportunity for funding through advance bookings and banks not being able to support financing of land transactions, simplifying the tax regime of REITs has become essential. This will include reducing the level of taxation on REIT income, having a waiver for capital gains tax for REITs on the transfer of property and making leasing of premises more attractive and less subject to the high service tax rates. 

To boost consumer demand in the sector, the industry hopes for more favourable taxation measures to be introduced by the government. These include increasing the tax deduction limit for housing loans to make it more in sync with the high cost of real estate in metropolitan India, raising the House Rent Allowance (HRA) and encouraging consumers to adopt home insurance through tax concessions on premiums.” 

5. Pankaj Bansal, Director, M3M Group:

 “Budget 2017 will be keenly watched for varied reasons. The overall economic conditions at present are sluggish and needs a booster dose of tax incentives to drive economy back on track. People have lot of expectation from current government and timely rationalisation measures will encourage people to adopt digitisation, declare higher income and move towards cashless and transparent economy. From the Real Estate perspective, a tax-friendly budget, an increased capital base complemented by recently announced interest rate cuts means growth as it will trigger consumption demand in a big way. This high purchasing power will result in people opting for real estate as an avenue for returns, as interest rates on deposits are expected to decrease thus making them less lucrative.” 

6. Vineet Taing, President, Vatika Business Centre: 

“The 2017 budget should bring in large benefits to the real estate industry. The roadmap of implementation of the GST bill can be a game changer. It is expected to lower the construction cost and in turn pass on the benefits to buyers. Tax incentives for business houses and entrepreneurs using rental space could also be an add-on.”