Union Budget 2019 India: Despite the Narendra Modi government’s constant focus on improving housing, real estate is perhaps the only sector of the economy that has witnessed a de-growth in the last five years. After agriculture, real estate is the second biggest employer in the country. Further, the sector is one of the biggest users of base products like steel, cement etc, which has a positive multiplier effect on the economy. As this will be the first budget of this new government, we expect the following from the government:
With start-up culture building in the country, the government should in line with affordable housing think of creating Tax incentive structures for affordable commercial. Incentives in affordable commercial space will help increase supply of quality commercial stock at affordable price to budding entrepreneurs.
Redefine affordable in Metro Cities
The cap for a project to be qualified as affordable should be increased to Rs. 1 cr for major metro cities. This will further help in reducing overall acquisition cost of residential units for middle class.
Incentive for subscription of Annuity schemes
If a senior citizen sells his home and invests more than 75% of the sale proceeds in government approved Annuity schemes then there should not be any capital gain tax on the transaction. This will provide additional retirement benefit to elderly citizens of the country.
Income Tax Deductions
Expanding the availability of income tax deductions for home buyers to Rs. 3 lakhs from current 2 Lakhs for self-occupied houses can incentivize new buyers and widen the market opportunity. The deduction for principal repayment of housing loan may be considered for a separate or standalone exemption under Section 80 C for up to Rs 5 lakh per annum for five years. Additional income tax deductions can be offered to those who are buying properties within the affordable housing segment. This will enhance the ability of the salaried class to invest in real estate.
Union Budget 2017 saw the affordable housing segment being granted infrastructure status. This year, it is expected that infrastructure status will be granted to the entire sector. This will lead to financing being available to the developer at lower interest rates. In turn, this would make projects more affordable for the home buyer.
Introduce the concept of Reverse Mortgage of senior citizens of the country.
Input Tax credit should be provided to developers.
Push for Rental Housing
Another expectation from the government is to frame a National Rental Housing Policy in order to meet the target of Housing for all by 2022. It is usually assumed that a person will buy property close to his workplace but he may not be employed in the same area all his life.
Green low-carbon-footprint buildings
The Government should make Green buildings with LEED certification mandatory in the times to come. The Government should, therefore, incentivize the developers so that they adopt green technologies. With several rating systems for green building already in place, the upcoming budget should provide tax breaks for green and low carbon footprint buildings.
Ample funding for Real Estate Sector
The liquidity crisis is the major factor preventing completion of over 5.6 lakh stalled units across top seven cities. For this, the government could possibly increase the finance limits for NBFCs – a major source of funding for developers. This will help revive the sector to a large extent. Besides NBFCs, the government must take steps to ensure bank funding to developers as the severe fund crunch is contributing significantly to project delays.