This year’s Union Budget is a crucial presentation that can help the real estate industry come out of its lacklustre performance of last year. So, what are the experts and home buyers looking for? Bindu Gopal Rao reports
After the New Year celebrations and revelry have died down, the next major event of the year that we eagerly wait for is the annual Union Budget that the Finance Ministry will be presenting later this month.
This highly debated event is something that will leave its impacts on individuals and industries alike. One industry that is hoping for good news is the real estate industry. This year’s meet is particularly important as the industry needs a revival (after a slowdown last year) and this can only be done if some of the key areas are addressed immediately.
With homes being a top investment priority for many, the real estate industry hopes to bounce back stronger this year with the help of a stronger Budget. To enable this, here are a few key areas that the Budget needs to focus on:
One of the key areas that people are looking forward to is the standard operating procedures and exemptions for home buyers.
“On the annual deduction for interest payments, I wish the government increases the limit to Rs 3,00,000 from the present Rs 2,00,000, and additionally making this deduction applicable only for property that is ready with an occupancy certificate,” says Surendra Hiranandani, chairman and managing director, House of Hiranandani.
Also, tax concessions on house insurance premiums could be introduced to encourage end-users to insure their homes. This can allow one to save more on taxes while dealing with the housing loan and house insurance premiums.
On the tax front, what can really help a home buyer is if the house rent deduction limit is raised. As salaried persons receive a house rent allowance (HRA) as a component of their total salary, they can claim a deduction. And the deduction can be substantial if their salaries and HRA are high.
“With changes in the Indian work culture resulting in far more self-employed people, the tax deduction limit on HRA, which is currently restricted to a meagre Rs 2,000, will hopefully be increased,” says a spokesperson from Century Real Estate.
Guha Lakshmanan, managing director, Casa Grande, Bengaluru, feels that there are some expectations that the Budget needs to consider seriously for the real estate sector.
“Firstly, the interest rate on home loans needs to be brought down to between 7.5 per cent and eight per cent. Secondly, there needs to be a reduction in the cost of property registration. Stamp duty and registration costs are as high as six per cent in most cases, and this needs to be reduced by a few basis points to aid consumers. Finally, the long pending Goods and Services Tax (GST) Bill should also be cleared,” he opines.
Addressing these needs can benefit the industry and consumers immensely. Moreover, the industry can also enter a more matured phase as opposed to the current scenario, adds Guha.
Home buyers’ interest
One of the major concerns that home buyers have is the failure of developers to deliver the project in the stipulated time frame. It is important that the Union Budget pays specific heed to this and offers financial protection to home buyers from project delays.
On purchasing an under-construction property, buyers can only claim tax benefits of Rs two lakh after possession and if construction is completed within three years. The benefits reduce to Rs 30,000 if the builder delays construction beyond this — and they pay higher interest. First-time home buyers purchasing properties for self-use additionally pay rent as well.
“Instead of allowing home buyers tax benefits post-possession, the Union Budget should make a provision that allows these from the time they start paying interest on housing loans. This will ease their monetary burden considerably and increase the velocity of home loan disbursements. Similarly, if an under-construction property is purchased from capital gains, its construction must be completed within three years of its sale to avail exemption. There can be delays by developer in such cases too. These deductions should be brought at par and the construction timeline should be extended from the current three years to five years,” says Anuj Puri, chairman and country head, JLL India.
In recent years, uncertainty about the possession of housing projects has emerged as the biggest issue in real estate. “In this scenario, as home buyers, we are expecting the government to offer financial protection from unnecessary delay of projects,” says Reetesh Singh, a Bengaluru-based homeowner. He also feels that the Finance Ministry should bring down the provision of the interest rate by half or lower until the time of possession for first time buyers. “Also, for a second home, the tax liability on rental income should be less than it currently is,” he opines .
First-time home buyers should be offered requisite financial incentives, given the unmet demand for housing. This becomes even more important for the country’s young population who are looking for housing.
Caring for seniors
Soon, India is going to be home to the largest number of seniors in the world. Today, several developers are approaching them as a separate market segment by creating customised products and services for them.
“Organisations that are making inroads into the geriatric segment can be promoted by offering income tax holidays, VAT and service tax exemptions,” says Sanjay Lakhotia, founder and director, Aamoksh One Eighty.
This would be especially beneficial to those who are in the business of setting up retirement homes, home care and assisted living centres. Besides these, promotion of senior citizen-led businesses, support to geriatric services and friendly reverse mortgage terms are needed.
“The current reverse mortgage product has failed to attract seniors in unlocking the potential of their asset,” adds Sanjay. “As a result, such initiatives need to be made friendlier. A push by the government to make the scheme popular will help a lot in making the life of seniors comfortable.”
Green advantage & more
Another segment that is making inways in real estate is the green homes concept. To encourage more stakeholders into this segment, the Budget should provide clear and convincing benefits to buyers and developers of green real estate in the country.
The stakeholders that are involved in the green real estate, especially that of green residences, definitely require a lot of encouragement to go the green way. This can be done by means of a variety of positive incentives that can pique and boost the interest of all involved stakeholders, more importantly the buyers and developers.
The one Bill that the real estate sector hopes will be passed during the upcoming budget is the much delayed GST Bill. “The Budget must consider the plight of the home owners and take into consideration the GST bill, which would give the industry a single-window clearance and will also cut costs on building material as all these factors are bound to change the current scenario for the homeowners tremendously,” says Akhil Kumar Sureka, managing director, Sarvome Developers.
Additionally, if the Real Estate Bill and Land Acquisition Bill get approved as well, they will change the home buying scenario significantly. “The Real Estate Bill, specifically, will benefit all the involved stakeholders as it is going to bring in more transparency in the system and eventually safeguard the interests of every consumer,” avers Akhil.
In lieu of the government’s mission to provide housing for all by 2022, it is important to keep the focus on providing the maximum benefits to home buyers. An individual’s right to own a house should be ensured by bringing in the necessary tax reforms and provisions, particularly for those buying houses for the first time.
“If such a provision is introduced, more people can be encouraged to buy properties and the real estate sector will also see improvement. Additionally, the government should bring some provision to discourage misleading advertisements to ensure that home buyers don’t get cheated,” says Pankaj Kumar Jain, director, KW Group.
With several hopes being pinned down on the upcoming Budget, here’s wishing for a budget that homeowners and buyers will cheer for!