When Union Budget is around, people look at it with a lot of expectation. Given the gloomy state of Indian economy and high expectations from various industries, Finance Minister Nirmala Sitharaman seems to be struggling to cope up with the demands in Union Budget 2020-21.
Addressing the ongoing economic slowdown remains a big challenge before the finance minister.
The real estate sector, which is struggling with a huge pile of unsold inventory in recent years, expects dole from the finance minister. The sector contributes more than 8 percent to the Indian economy. The sector wants quick implementation of alternative investment funds to rescue stressed residential projects.
The recent geopolitical tensions in the Middle East between US and Iran has lifted crude oil prices, which along with rise in domestic inflation, limit the Reserve Bank of India’s scope for a reduction in interest rates for home loans.
Experts say that some of the measures that the government could provide including cuts in personal taxes may not yield result.
“Hike the Rs 2 lakh tax rebate on housing loan interest rates under Section 24 of the Income Tax Act. This could kick-start healthier demand for housing, especially in the affordable and mid-segment categories,” said Anuj Puri, Chairman, ANAROCK Property Consultants.
Puri also suggested an input tax credit (ITC) benefit in GST for under-construction homes. While the GST rate on under-construction properties was reduced to 5 percent in 2019, the previous ITC benefit was shelved.
“Already cash-starved developers can’t avail of tax benefits for construction raw materials and the increased costs are passed on to buyers. Providing ITC benefits is a great incentive to reduce property prices and make under-construction homes attractive again,” Puri added.
The realty players also demand immediate deployment of the alternate investment fund (AIF) of Rs 25,000 crore created to fund stressed projects.
Further, the government’s plan to spend Rs 100 lakh crore on infrastructure over the next five years needs speedier on-ground implementation.
Industry body National Real Estate Development Council (NAREDCO) expects the finance minister to address the complex issue of liquidity in her budget proposals. It demands for bold fiscal measures in key areas of concerns.
“Growth of real estate and urban infrastructure is imperative to provide an impetus to India’s economic growth. A fiscal stimulus to the real estate sector will have a manifold effect on 269 allied industries with a multi-dimensional impact on enhancing the GDP growth inclusive of employment creation. It will play a pivotal role in achieving an ambitious target of $5 trillion economy,” said Niranjan Hiranandani, National President, NAREDCO.
The real estate veteran said that the industry has been demanding a restructuring of loans or a one-time rollover to reduce the stress. In such cases, the borrower will retain the asset classification of the restructured standard accounts as standard and the same will not be treated as NPA.
Further, NAREDCO expects interest rates on home loans reduced to 7 percent per annum and the benefit of a rate cut should transmit to end-users in order to revive the demand.
The sector also demands a reduction in stamp duty by 50 percent for all real estate transactions registered on or before March 31, 2020 and incentivise the rental housing with tax incentives, said Hiranandani.