Real estate industry is calling for continuation of reforms in the sector to ensure consolidation and revival in sales. As the previous budget granted infrastructure status to affordable housing, players are hoping that the upcoming one will accord the tag to the entire realty sector.

While the implementation of RERA and GST were watershed events for the sector, sectoral analysts note that a total revival can come through only if the government increases tax exemptions and rebates on home loans.

Clarity on tax norms

On the supply side, developers want the government to incentivise builders who undertake affordable housing projects and also have clarity on tax norms for REIT to come into play.

Ashish R Puravankara, Managing Director, Puravankara Ltd, said, “With the industry now aligning itself with the new structural blueprint, the expectations are from the budget are high among developers and homebuyers. The sector is hopeful that a viable roadmap for sustainable growth will create employment opportunities across the industry and eventually be a catalyst for a stronger India. Homebuyers are one of the most important stakeholders. Giving them a compelling support system in the form of lower interest rates on home loans and incentives for new homebuyers will encourage them to invest in real estate.”

Ankur Dhawan, CIO, PropTiger.com, said, “The sector’s biggest expectation from this budget is to increase the tax deduction on home loan interest from ₹2 lakh to ₹3 lakh. Also budget should give similar benefit on pre-EMI interest paid by customers during the construction period and not only after completion of project. This will help improve demand for under-construction units and help the sector.”

Industry status

Niranjan Hiranandani, President, NAREDCO, and CMD of Hiranandani Communities, said, “It is imperative that this sector gets due weightage in the upcoming budget for policies and incentives that enhance the development of the sector. Industry status to the full real estate sector will help create surplus housing demand along with financing at the lower rate for long-term projects. Rationalisation of GST by capping at 6 per cent with input tax credit for the entire real estate segment will help revive and boost demand.”

Other key demands include exemption from capital gain tax if the sale proceeds are invested in housing activities to create one or more housing stocks. Besides this, players are also seeking removal of taxing notional rent income. Taxing notional rent income after one year from the end of financial year in which completion certificate is obtained will lead to financial implications.

Shishir Baijal, CMD, Knight Frank India said, the GST regime has induced new cost burden.

Land cost

“At present, real estate falls under 18 per cent tax bracket of the GST Act with one-third abatement for land. However, in major metros, the share of land is more than 50 per cent of the project cost. We, therefore, recommend that the government align this with market realities and increase the abatement for land to 50 per cent,” Baijal said.

Real estate industry expects big-ticket announcements with regards to the Special Economic Zones (SEZs). Relaxation on Minimum Alternative Tax (MAT), re-incentivising the developers to develop new projects, slashing the minimum required SEZ size in smaller and special states are to be expected.

Ashwin Sheth, CMD, Sheth Group, said, “Clarifying the taxation norms for REITs is the need of the hour for listings to start flowing in as it will benefit the entire sector by the large bandwidth of investors.”

Lending status

An ICRA report on budget expectations notes that priority sector lending status for home loans up to specified limits, say ₹60 lakh for metro cities and ₹45 lakh for non-metro, may boost demand in the near to medium term.

It also notes that the government’s efforts on affordable housing segment can be further intensified by augmenting the current schemes and relaxing the eligibility criteria.