There is no doubt that real estate, particularly the residential segment, has bounced back strongly post pandemic. Driven mainly by pent-up demand, stable price and historically low interest rates on home loans, sales in the top 8 cities crossed pre-COVID levels in the year 2022.
However, with interest rates on home loans now moving upwards, a lot depends on the upcoming Union Budget 2023 to support and sustain the housing demand in the year 2023 and beyond.
Few key amendments and enhancement in existing tax deductions limit is the need of hour. The fact that the current slabs and deductions limits have not been changed for many years, it's high time that the government should revisit these limits and make appropriate amendments.
Hope from the finance minister is all the more, as the direct and indirect tax collections are witnessing significant growth and the fiscal deficit is expected to come down. According to data issued by the Finance Ministry on December 17, India's gross direct tax collections for the Financial Year (FY) 2022-23 stood at over Rs 13.63 lakh crore, registering a growth of 25.90 per cent compared to the same period last fiscal.
So, keeping all these things in mind, here are a few expectations or wishlists that we have.
Bring GST down to single digits on construction materials
Given that cost of construction has gone up significantly in the last couple of years, in order to support real estate, especially affordable housing segment where margins are thin, the government should think of rationalizing GST rates. It should be brought down to single digits on construction materials like steel, cement, tiles and so on.
Deduction limit should go up
Since the last few years, right at the top of the wishlist has been the enhancement of the income tax deduction limit against home loans interest payment. The current deduction limit of Rs 2 lakh per annum was last enhanced in the year 2015. With interest rates going up and inflation impacting the finances of taxpayers, we hope Finance Minister Nirmala Sitharaman will certainly look into this long pending demand and raise the deduction limit under section 24 to at least Rs 3 lakh. Also, entire interest should be allowed as a deduction, especially in the affordable housing segment.
Separate deduction for home loan principal
The other major demand that most home buyers have is a separate section for deduction against home loan principal repayment. Currently, section 80C is cluttered with too many avenues, which qualify for deductions under the same section. Very few people are left with scope to claim deductions for home loan principal repayment under section 80C. So, a separate deduction against home loan principal repayment can be a game changer for the real estate sector.
Remove the cap for set-off losses
Government should reconsider the loss set-off limit under the income tax head house property. Earlier there was no such limit, but in the Finance Act 2017, government restricted the amount of loss to up to Rs 2 lakh per year under the head House Property which is allowed to be set-off against Income from Other Sources. This limit should be removed or enhanced to bring back investors in the sector, this will eventually support the rental housing market to meet demand.
Real estate sector being a major contributor to India’s GDP needs more focus from the government. Besides above, there are few other aspects that the government should also look into. While the problems of unsold inventories have reduced significantly in the last couple of years, the problem related to stalled projects is still standing tall. The government should put aside more funds under the stress fund SWAMIH. Also, policies should be relaxed or scope of policy should be widened so that stuck projects can be completed.
Also, subsidy under the Credit Linked Subsidy Scheme (CLSS) has been a big saving and motivation, especially for low-ticket housing demand and should be continued to achieve the "Housing for All" mission.
Views are personal. The author is Founder and chairman, Signature Global
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