Expectations of Real Estate Industry from Budget 2020
Steps that will help in reviving demand in real estate sector
Real estate industry has been through difficult times braving policy initiatives and regulatory reforms in the recent past. The overall subdued economic situation with GDP coming down to 5% has adversely affected the demand cycle in the real estate.
While the government has introduced various policy initiatives such as RERA, GST and IBC to streamline the business and has infused Rs 25,000 crore through alternate investment fund for last-mile funding of affordable homes, the government needs to safeguard the sector, which accounts for 8% of the GDP, and we expect some relief in the union budget-2020. It is our earnest request that the government should take this opportunity to revive the real estate industry by boosting the demand.
The initiatives should be in line with the objective of Government’s stated position of “Housing for All by 2022”.
- 80IBA scheme time limit should be increased
- ECB should be allowed for affordable housing and commercial office spaces as well.
Following steps will help revive the demand in real estate sector. The initiatives will not only help the home-buyers but developers as well.
-- Deduction of interest on home loans
An individual is allowed to avail of deduction of interest on loan for acquisition of a house. However, the deduction is allowed only on loans sanctioned between 1.4.2016 and 31.3.2017 and the amount not exceeding Rs 50,000. Following suggestions are made to boost demand for housing.
*The timeline for the loan may be extended to March 31, 2022 in line with Housing for All by 2022.
*In case of individuals, 100% interest on home loan be allowed as deduction for first home.
*100% interest on home loans to be allowed as deduction for 2nd and 3rd home provided that except self-occupied home, others are rented for a period of nine months during the year. The measure is being suggested to boost rental housing, tax-break to be given to rental income earned by individuals.
-- Section 43 CA
Section 43 CA of Income Tax Act is a barrier to natural price correction and the stalled project has a cascading effect on home buyers, banks and other stakeholders and needs to be removed or amended to exempt primary sales or at least allow sale at 30% below circle rate.
*The benefit of ITC be restored to real estate GST by charging GST at 12% with allowance for land cost at 33% on par with current rate of works contract services for government projects.
*Taking into account the output GST being paid on such rentals on commercial leases, the restriction from input tax credit eligibility under section 17(5) (c) and 17(5)(d) of the CGST Act, be removed.
One Time Restructuring Scheme for Real Estate Projects
Liquidity shortage continues to cause distress in real estate. Hence, a one-time restructuring scheme with moratorium on principal and interest of 2 years is immediately needed.
Easing Flow of Funds for Housing
Housing loan up to Rs 1 crore may be counted towards priority sector and interest rates to be below 7% effectively.
- Mr. Mayur Shah, MD, Marathon Group