The upcoming Union Budget 2016 will help the real estate sector recover from the existing slowdown if required incentives are announced. Hope is afloat amongst various industries and individuals for a revival.
The decisions that will be announced on February 29 by the Finance Ministry will have a significant impact on the real estate sector as well. Considering the slowdown that the sector has been experiencing in the last three years now, the real estate sector could really do with some helpful financial rebates and policies. Those who are connected in any way with the industry have their hopes pinned on the forthcoming Union Budget 2016, which they anticipate should bring good tidings for both the victimised home buyers as well as fund-starved developers.
In the following sections, this article will broadly discuss some of the expectations that real estate players have for the sector from the Union Budget 2016.
Granting of ‘Infrastructure’ status to the realty sector
Experts strongly believe that giving the Indian real estate sector the status of ‘infrastructure’ will solve the problem of funds for developers to a great extent. This is one of the major stumbling blocks for developers who are not able to complete their projects due to a fund crunch. Bestowing the sector with ‘infrastructure’ status will definitely ease the issue of fund scarcity as the developers will have access to more fund sources through domestic bank lending routes, foreign direct investment and external commercial borrowing. The sector will also be able to avail the benefits of infrastructure policies.
Protection for home buyers
- The tax deduction limit of Rs 2 Lakh should be increased to Rs 3 lakh in the metro cities at least where the property prices are skyrocketing. Tax concessions could also be introduced on house insurance premium which will encourage the home buyers to go for home insurance.
- In the case of post-possession tax benefits, tax claim of up to Rs 2 lakh is considerably reduced to Rs 30,000 if the builder fails to meet this three-year deadline. Why should the buyer suffer for the incompetency of a builder? The Budget 2016 should reduce this burden on home buyers by allowing them these tax reductions along with paying the interest on home loans. This will also decrease the time taken for paying back home loans. Moreover, a clause should be introduced in the sale deeds which will require the developer to compensate the buyer if they fail to complete the project within the stipulated time frame.
- The project construction deadline of three years can also be extended to five years.
- The Union Budget 2016 should also consider the inconsistency in the Section 80GG which allows self-employed individuals with no HRA component in their salary to claim a maximum deduction of Rs 2,000 only as compared to those people with higher salary and HRA.
Promote infrastructure development in the peripheries of metros
The Budget 2016 must focus some its attention as well as funds to develop infrastructure and improve connectivity in the metro peripheries else their dream of providing ‘Housing for All by 2022’ will remain unfulfilled. Developers chosen for the task should be given cheaper financing to encourage its achievement.
Discard Dividend Distribution Tax, revive REITs
Even though introduced last year, the country has not yet witnessed a single listing of REIT. This is due to the Dividend Distribution Tax (DDT) which needs to be eliminated as an obstacle in the Union Budget 2016. Once this is done, REITs have the power to revive the real estate sector of India from the dumps alone and provide a significant push to the economy as well.
Implement the GST Bill
The Budget 2016 should also provide clarity on the implementation of the Goods and Services Tax (GST) bill as this will establish a very clear and organised taxation structure bringing about a major positive change in logistics architecture.
Pass the Real Estate Regulation and Development Bill
The Union Budget 2016 should seriously consider the passage of the Real Estate Regulatory Bill as it will seriously bring in the required provisions for the real estate sector. It will not only implement stricter buyer protection measures but will also regulate the sector and root out corruption.
Author’s Note: Pawan Jasuja, Director, Finlace Consulting shares his expectations from the Budget 2016. He is a seasoned real estate and IT professional with more than 14 years of successful experience in direct and indirect sales of a range of Products & Services working with a team to redefine professionalism in Indian Real Estate.