Business Today
Loading...

Budget 2021: Affordable housing, enhanced deductions among homebuyers wishlist

Budget 2021: Following three years of business disruptions due to GST implementation, demonetisation, the NBFC crisis, and the realty law RERA, the market had started stabilising only to be thrown out of gear again by the COVID-19 pandemic and the subsequent lockdown imposed in March

twitter-logoBusinessToday.In | February 1, 2021 | Updated 08:37 IST
Budget 2021: Affordable housing, enhanced deductions among homebuyers wishlist
Budget 2021

The year 2020 was meant to be a year of recovery for the Indian real estate sector, particularly the housing segment.

Following three years of business disruptions due to GST implementation, demonetisation, the NBFC crisis, and the realty law RERA, the market had started stabilising only to be thrown out of gear again by the COVID-19 pandemic and the subsequent lockdown imposed in March.

Rather than growth and revival, 2020 brought more distress in the realty sector, paring down around 50 per cent of business in the residential segment from an already low base. However, with ease of restrictions, from June onwards, the housing sales along with development activities, started picking up. Nonetheless, the housing sector expects additional measures to be announced in the Union Budget 2021, which can cushion revival in demand and eliminate supply-side challenges faced by developers.

Industry body FICCI, in its pre-Budget 2021 memorandum, said that the Budget 2021 needs to give further impetus to affordable housing, especially in metro cities.

The chamber has suggested that the stamp duty value for additional deduction provided to first-time homebuyers should be increased to Rs 65 lakh, which presently cannot exceed Rs 45 lakh. A first-time homebuyer can avail deduction up to Rs 1.5 lakh per annum on the interest payable on a housing loan granted between April 1, 2019, and March 31, 2021.

FICCI is of the view that it is difficult to buy a house in a metro or Tier-1 city with such a low cap on stamp duty. "The present deduction is likely to benefit only lower-income borrowers in Tier-2 and Tier-3 cities/towns," the industry chamber said in the memorandum.

It added that the government should enhance this stamp valuation to Rs 65 lakh, at least for metro and Tier-1 cities like Hyderabad, Pune, etc., which will incentivise the purchase of affordable housing. FICCI further stated that Finance Minister Nirmala Sitharaman should also extend this timeline for housing loans to March 31, 2022, instead of the present March 31, 2021.

Besides, the realty sector expects the finance minister to introduce GST reforms in Budget 2021 by bringing back the Input Tax Credit, as this will help in bringing down the cost of construction, thereby reducing property prices. Moreover, the sector also expects GST waiver for under-construction properties in the housing segment, as it believes these measures will spur demand in the sector and ease the prevalent financial crunch.

Made with Flourish

In addition, higher tax relief for homebuyers is also one of the demands of the sector, which expects the government to extend the cap of Rs 2 lakh on housing loan interest under section 24 (b) of the IT Act to Rs 5 lakh. This will eventually leave more disposable income in the hands of people and drive demand.

Realtors' apex body CREDAI has suggested the government to increase tax exemptions in the upcoming Budget to boost housing demand and enhance the limit of deduction under section 80C of income tax for principal repayment on home loans.

It also said there should be a separate exemption for principal repayment on home loans.

CREDAI, which has around 20,000 members from across the country, has also recommended tax incentives to boost investment in Real Estate Investment Trusts (REITs).

"The real estate sector has been under stress for more than 2 years. Economic uncertainty enforced by the COVID-19 pandemic has only made it worse for the sector. After battling for survival, the sector is slowly moving towards revival," the realtors' apex body said.

The association said that ensuring liquidity, access to funds, and longer repayment cycles will help developers. It sought cheaper home loans and tax benefits on investments in housing to boost demand.

"Reforms in taxation related to affordable housing, joint development and steps to promote foreign investment are the need of the hour," CREDAI noted, further suggesting that investment of up to Rs 50,000 in REITs should be allowed as deduction under Section 80C.

Currently, units of REITs need to be held for 36 months to make them a long-term capital asset eligible for lower tax rate.

REIT is a tax-efficient vehicle that enables owners of real estate to pool income-generating assets together in a portfolio and allows investors to buy ownership in real estate assets in the form of equity.

In India, two REITs have been listed so far.

  • Print
  • COMMENT
BT-Story-Page-B.gif
A    A   A
close