Budget 2022: A Year of Implementation for Indian Real Estate

With annual budget in offing, Indian home buyers along with the industry doyens anticipate policy stepping up measures to rationalize tax, stimulate innate demand, and foster a favorable investment climate.

Indian Real Estate sector did not go unscathed from the menace of Covid-19 global pandemic, but with surprising resiliency of the economy and rapid shifts, the real estate sector pivoted without skipping a beat. The industry faced enormous challenges right from migrant labor migration, supply chain disruptions, acute liquidity crisis and other daunting hurdles. The pandemic acted as blessings in disguise for the property market, as the value of owning a home was underpinned on grounds of safety, stability, and flexibility it offered in the crisis.

Covid pandemic stimulated the perennial demand for housing, which saw translation of all time renters into first time homebuyers, entry of young millennials in home buying segment, existing homeowners seek an apt opportunity to upgrade into larger size homes and also safe bet investment asset appealed investor communities to park their funds for wealth generation.

As the year 2021 was about Resiliency, the ensuing year 2022 will be watched as the ‘Year of Implementation’- a litmus test for the economic and GDP growth. After a black swan event, precarious impact on the lifestyle and business continuity strategies with divergence trend, the real estate sector is astonishingly getting back in rhythm with strong end user demand, government stimulus and fundamental shifts in functionality of real estate assets. With annual budget in offing, Indian home buyers along with the industry doyens anticipate policy stepping up measures to rationalize tax, stimulate innate demand, and foster a favorable investment climate.

The budget wish list encapsulates few key recommendations as:

· Individual Tax should be reduced from 42 per cent to 25 per cent

· Subvention schemes ban to be uplifted as it doesn’t favor home buyers. As a large segment of these do not have the capacity to pay both, EMIs on their under-construction home loans as well as house rent.

· Enhance Quantum of Loan to boost home buying. The RBI, through a notification in 2017, allowed a loan-to-value ratio (LTV) of up to 90 per cent for home loans for affordable houses of Rs 30 lakh or less. The Budget can permit the extension of same facility to MIG and HIG segments

· Allow full interest on housing loans as a deduction under the Income Tax Act without any ceiling. In the alternative, the limit should be increased to Rs 5 lakh from the current limit of INR 2 lakh under Section 24 of IT Act 196 to incentivize home buyers and spur overall demand.

· Rationalization of taxation when it comes to Long Term Capital Gains from sale of House property. It should be pegged at 10 percent similar to section 112 for equity shares. Also, the period of holding of house property should be reduced to 12 months from existing 24/36 months to qualify the same as long term capital asset.

· In order to encapsulate a wide spectrum of home buyers under the umbrella of affordable housing in metro cities, the expansion of the definition by extending the price cap up to Rs 1 crore will bolster housing demand and attract many new players in the market. Also, extend benefits of CLSS and PMAY schemes to induce more first-time home and female home buyers

As the trend of ‘Work Anywhere, Live Anywhere’ garners traction amongst the working populace, the demand for rental housing will be on uptick. Career mobility, remote and hybrid work models will encourage the government to emphasize on rental housing in the form of taxation benefits for tenants like Enhancement in HRA Tax Exemption is one such option. The deduction allowed is up to 50 per cent of employee salary if he or she lives in Metro cities in India and up to 40 per cent in any other city. If the Budget enhances this limit, it will encourage uptick in rental housing across geographies. Another, positive announcement can include making rental income fully tax deductible to encourage creation of rental housing stock in order to meet the ambition of Housing for All.

Budget measures can also facilitate the real estate industry achieve its ESG pledges while charting a roadmap to address complex issues like climate risk, net zero emission, carbon neutrality, green living, and clean energy. This can be achieved by developing a strong collaborative and consistent policy environment through redefining building codes and other regulation framework. Incentivizing industry with SOPS and stimulus in order to adopt energy efficient initiatives on a large scale to meet long term goals of sustainable living will go a long way in green engineering.

Thus, gaps in demand and supply economics need to be bridged with greater sense of partnership between Government, apex authorities and industry bodies to address issues of housing and its affordability more effectively. Industry will continue to make meaningful progress with conducive policy framework and budget stimulus in order to help India achieve the target of a $5 Trillion economy.

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Source: realty.economictimes.indiatimes.com