The real estate sector is one of the nation’s most economic engines, second only to agriculture in terms of employment generation. Also, the realty sector is anticipated to account for as much as 13 percent of the country’s GDP by 2025.
In 2020, the sale of residential units fell by a huge margin of 60 percent as compared to that of the year 2019. Nevertheless, the market witnessed a solid comeback between July 2021 to September 2021. The residential sales in top 8 cities are back to the pre-pandemic level, whereas in the commercial market an overwhelming 68 percent of the overall leasing took place in the second half of 2021.
In the previous Budget, the government had given TDS relaxation, allowed for foreign player participation to real estate via REITs and INviTs, and has also recently removed regulatory huddle of RBI permissions for investing in residential and commercial properties by NRIs. Even SWAMIH fund has been a great blessing to the sector.
We are looking forward to a robust housing demand revival in 2022, which cannot happen without the government support. We believe the government should consider the following points in this budget so as to boost the real estate sector.
1) Concession is availed in Income tax upto 2 lakhs as interests paid on home loans, this limit must be revised and increased to 5 lakhs under section 24.
2) Reduction in GST paid on input materials: This will also help developers withhold rental/lease assets better by offsetting GST on rent from completed property.
3) The status of the infrastructure industry needs to be given to realty sector in order for it to raise funds from financial institutions, i.e. enable debt refinancing for developers, raise capital at lower rate and attract equity investments.
4) Affordable housing needs to be re-defined inclusive of cost of construction and cost of land, as per the city. For example, in a city like Mumbai affordable housing should go upto 85 lac, since land price and construction cost is higher.
5) Extend the benefits of affordable housing such as tax reimbursements beyond 2022.
6) Bringing co-working spaces into a 2 percent TDS slab as in the case of services from the present 10 percent. This will immensely help the co-working spaces in the management of their cashflows.
The time is really opportune for a further upward revision, but the government may not have a cushion for incorporating points 1,2 and 6. It might be more appropriate for the government to frame a broader fiscal management strategy in order to revive the economy from the COVID pandemic shock and hence continue to increase incentives to MSMEs and SMEs.
(The writer is Chief Advisor, Marketing & Communications at Berkshire Hathaway HomeServices Orenda India)