The Union Budget 2016-17 should address hurdles coming in the way of initiatives such as Smart Cities, Affordable Housing, Single Window Clearance mechanism, interest on home loans, increased foreign investor’s participation and REITS.
Real estate was more in a policy formation phase in 2015, wherein a lot was initiated to make the sector more professional, transparent and structured. The market has been a little slow in the past and as a result of the same; home buyers, as well as realtors have been paying a heavy price. Like every year, the real estate majors have high expectations with the Union Budget 2016-17 for redressal of several issues. The question is that whether the event will be of any help to the sector that has been struggling for quite some time now?
We are quite upbeat about the new budget being a positive one, especially for the realty sector. With improving macro-economic conditions and transparency in the Indian real estate sector, the the scale of investments is expected to increase in the coming years. Thus, we majorly expect the Budget to address certain complexities of real estate market and thus bring back the lost cheer.
Some of the expectations from the Union Budget 2016-2017 are:
In its policy formation phase, a lot has been proposed and done to make the sector more professional, transparent and structured. The implementation of the Real Estate Regulatory Bill is on the top of the wish list. If the Bill reaches a positive conclusion, it will benefit the customers and responsible realtors alike. Bringing in the much-needed transparency to the realty sector, it will bring back the confidence of the home buyers.
The introduction of the goods and services tax (GST) is next on the list. We are expecting the budget to roll out the same as the multiple taxes that the buyers have to pay, such as the service tax and value added tax (VAT) along with stamp duties and registration charges, will be substituted by the GST. The approval of the GST Bill will lead to a reduction in the construction costs and will also avoid multiplication of taxes. The rationalization of stamp duty and local levies is also expected.
Another expectation from the budget is the reduction in property registration cost. Also, to revive the falling market, interest rates on home loans should be reduced and the home loan interest amount benefit under tax exemption should be increased. The current limit is insignificant when compared to the ticket sizes in cities like Mumbai. The tax concessions are usually offered after the possession, but it should be allowed from the time the buyer starts paying the interest on their home loans. The premiums paid on house insurance should also be made tax deductible to boost the confidence of the buyers. The maximum deductions of Rs 2,000 per month under section 80GG as the House Rent Allowance (HRA) component should also be addressed in the case of self-employed persons.
Obtaining numerous sanctions from various civic and government authorities is a long process that majorly leads to the project delays. A single window clearance will shorten the project cycle thereby giving financial protection to home buyers and ultimately reducing the slump faced by our sector. We also expect rationalization of taxation of Real Estate Investment Trusts (REITs) and the grant of infrastructure status to the sector.
Real Estate is waiting to get past a lot of hurdles and initiatives such as Smart Cities, Affordable Housing, Single Window Clearance mechanism, interest on home loans, increased foreign investor’s participation and REITS etc. These will have a major impact on the growth of our sector and the Budget should address all of them. Currently real estate is struggling with a demand-supply mismatch, majorly due to high property prices. We expect major inclusions from Budget this session to help uplift the real estate market and simultaneously balance the sentiment a little.
Author’s note: Mr. Sam Chopra is the Founder & Chairman, RE/MAX India, Master Franchisor for INDIA Region, Global Real Estate Franchising Network. A Chartered Accountant with a career spanning more than 30 years of diverse experience and numerous successful entrepreneurial assignments under his belt. His significant contribution in the Real Estate sector has made him the recipient of “Award for Excellence” at Realty Kings of North India, 2014.