Budget 2020 Wishlist
AS THE COUNTDOWN TO THE BUDGET 2020 IS NEARING ITS END, ACROSS SECTORS, THE EXPECTATIONS OF HOLISTIC POLICIES AND STIMULUS PACKAGES TO BOOST INDIA’S ECONOMY ARE PITCHING HIGH.
While, captains of the Indian economy are forwarding their lists of demands, leaders of real estate sector too are expressing their wishes for the coming fiscal year. Former chief economic adviser Arvind Virmani wants to see in the budget, an introduction of long-pending reforms on the direct tax code and the simplification of the goods and services tax (GST). “A short-term (12-18 months) increase in fiscal deficit will be accepted by capital markets, if they can be convinced that gains from efficiency and voluntary compliance will reduce the fiscal deficit over the next few years,” he said.
Vivek K Chandy, Joint Managing Partner & Jayantika Ganguly, Principal Associate, J. Sagar Associates expressed that the expectations are always high for an upcoming budget, and currently, this is especially true for the real estate sector. “As such, the sector is looking to the government to address a number of issues to ease liquidity. These include a single-window clearance mechanism, granting of industry status, rationalization of stamp duty and registration fees, tax breaks (both income tax and GST) and land reforms to provide a much-needed boost. The need of the hour is sustained and sustainable growth for the real estate sector, and this is expected to be the government’s focus”.
Dr Niranjan Hiranandani, National President, NAREDCO said, “Growth of Real estate & Urban infrastructure is imperative to provide an impetus to India’s economic growth. Fiscal stimulus to the real estate sector will have a manifold effect on 269 allied industries with multidimensional impact on enhancing the GDP growth inclusive of employment creation. It will play a pivotal role in achieving an ambitious target of $5 trillion economy”.
In this Budget 2020, Indian real estate sector expects a holistic solution rather than the piece-meal solutions that have been offered so far. The problem of liquidity is a complex one, what is needed is resolution with execution speed – so, there is a need for ‘acceleration’, and NAREDCO hopes that the Hon’ble Finance Minister does the needful in the upcoming Budget proposals.
Satish Magar, President at CREDAI — National said, “Over the last few years in India, the real estate sector had to cope with institutional changes and fall in the growth of GDP. The government needs to take direct measures for the revival of the real estate sector as a part of measures to boost GDP growth. The change in IBC, setting up of stressed funds are amongst the steps in the recent past intended to spur the investments in the real estate sector. The budget 2020-21, therefore, would provide the government an occasion to boost the real estate demand as also continue to encourage private sector investment particularly in affordable housing, in line with the objective of ‘Housing for All by 2022’.”
REAL ESTATE SECTOR HOPES
Liquidity Issue – Real Estate Industry is facing serious challenges related to liquidity crunch which needs bold fiscal measures for resurrecting the reeling industry. The industry has been demanding restructuring of loans or one time roll-over in case of the stressed assets at the options of banks. In such cases the borrower will retain the asset classification of the restructured standard accounts as standard and the same will not be treated as NPA.
Interest Rates & Home loans – Interest rates on Home Loans shall be reduced to 7% p.a and the benefit of rate cut should transmit to end users in order to revive the demand.
Stamp Duty – Reduction in stamp duty by 50% for all real estate transactions registered on or before 31st March 2020 shall induce the fence sitters to turn into the actual home buyers spurring up the demand and consumption.
Incentivize Rental Housing – To achieve the target of Housing for All by 2022, rental housing will play a vital role. With rapid urbanization and migration there is huge need of developing rental housing model to befit the need of the ever increasing population in urban areas. In order to achieve this, we have recommended some tax incentives (as attached in the annexure). Redefine
Affordable Housing – Recently, the definition of affordable housing has been amended in GST and Income Tax Laws and as a result the affordable tenement has to meet the dual condition of area and also the price cap of Rs 45 lakhs. As a result almost all the houses in the MMR and most of the houses in NCR and other metros do not qualify as the “affordable housing” resulting in the loss of benefit of reduced GST rate of 1% and also the benefit of tax exemption from such projects. We recommend that the condition related to price cap of Rs 45 lakhs be immediately abolished and the benefits be restored to all the houses which have area less than 60/90 Sq meters.
Taxation Spectrum – There are provisions which create genuine hardships to real estate developers, who are already under pressure in the on-going sluggish market. Real estate industry is already struggling with large unsold inventories. Taxing notional rent (Section 23(5) of the Income Tax Act), after one year from the end of the financial year in which completion certificate is received from the competent authority, will lead to severe financial implications for the developer/industry. It may also lead to no new projects being launched, if sales remain low, which in turn will defeat the mission of the Government to provide “Housing for All” by 2022.
THE HOMEBUYERS DEMANDS
Increase Tax Deduction on Rental Property: A standard deduction of 30 per cent from the net annual value allowed towards repairs and maintenance costs of the house has not seen any revision since 2002. This standard deduction should be increased to at least 50 per cent in view of rise in inflation over the years. Increase Rebates on Home Loan Interest: The limit of Rs 2 lakh deduction for self-occupied property should be increased to at least Rs 5 lakh that would in return make housing more affordable. Provide Tax Incentives on Income: Similar to corporate tax rate cut from 35% to 25%, provide similar relief on income tax to the middleclass which will stimulate housing demand and help boost the real estate sector.