Real Estate sector in India has recuperated in the post-pandemic period. Amidst the resurgence of housing demand and commercial property investment, the Budget 2023 has put the sector in high hopes of benefits and incentives that could lead to express industry growth.
Research states that up to 15% of housing sector growth was witnessed by the Realty sector Year-On-Year! The sector expects growth this year on similar lines. This can be achieved if the following expectations from Budget 2023 come true.
Major Expectations of the Real Estate Sector from Union Budget 2022-23
- Alterations in home loan rates-
Housing demand is directly affected by home loan interest rates. Home buyers are encouraged to buy properties because of low home loan interest rates. Following Coronavirus, business sentiment was low, and people were hesitant to purchase property. However, it took some time before nationalized banks and non-banking finance companies (NBFCs) were able to reduce interest rates.
In the budget recommendations, the Union government can announce enabling measures like low down payment requirements, special incentives for small home loans, lower interest rates for the economically weaker section (Citizens not covered under PMAY), etc.
Furthermore, the Real Estate industry recommends increasing the monthly principal deduction on home loans to at least Rs 4 lakh (from 1.5 lakhs) in the Union budget 2023.
- Increase in deduction limit on taxes-
Under section 24 of the Income Tax Act 1961 India, the deduction of Rs. 2 lakhs is given on the home loan interest rate. The Realty sector expects the tax deductions to be 5 lakhs. The increase in the deduction of tax limit can help give a push to housing demand due to affordability.
- Changes in Capital Gains Tax regime-
Income tax law defines Section 54, which states that the proceeds from the sale of a house can be used to purchase a new or under-construction property. Long Term Capital Gains can be exempted through this method. It is however possible to claim the exemption only if the construction is complete within 3 years of the date of sale for an under-construction property.
It is necessary to lower the 3-year cap in the Union Budget 2023 because factors such as delays in construction activities, pollution bans, Coronavirus, and large townships have their own timelines. Under Section 54 of the Income Tax Act, homebuyers can easily claim LTCG exemptions.
- Rationalization of GST Regime-
Due to the global Coronavirus pandemic, input costs have risen and margins have decreased. In addition, high GST rates on construction materials increase the cost of houses, leaving homebuyers with a hole in their pockets. Currently, the Goods and Services Tax (GST) on steel and cement is 28 per cent and 18 per cent, respectively.
Developers cannot claim an Input Tax Credit (ITC) on the GST they paid, further compounding the cost woes. By rationalizing the GST regime and ITC in the Union Budget 2022-23, the government can reduce the overall cost of housing.
Ultimately, India's Real Estate sector has high expectations from the Finance Minister and the Union Budget 2023. It is expected that the Real Estate sector will recover strongly in 2023 as a result of major demands such as rationalization of the GST, changes to the tax slabs and increased funding for affordable housing.
