Hit hard by the pandemic amid economic slowdown and stagnant property prices for a couple of years now, real estate developers are betting big on this year’s Union Budget for revival of fortunes. Although housing sales have started increasing in recent months for a variety of reasons, including lower interest rates, hybrid working model, and homebuyers’ urge to move into a bigger and safer house, commercial realty is still facing challenges. Moreover, small-to-medium-sized developers are also facing challenges in terms of reduced cash flows and credit availability.
No wonder, a majority of real estate players are looking towards Finance Minister Nirmala Sitharaman’s Budget 2022 announcements with much hope as they believe only a good handholding from the government can put the sector on a strong footing. Here’s what they want from the FM to give a boost to the sector:
Industry Status and Single Window Clearance: The Union Budget 2022 must focus on strengthening the investment climate and streamlining taxation in the real estate sector. “We expect the government to address the sector’s long-pending ask of industry status and single-window clearance in the upcoming budget. Bagging the industry status will facilitate the realty sector to avail legitimate and easy finance from banks and financial institutions. On the other hand, the single-window clearance will help fast-track the construction and delivery process as delays in approvals continue to be a roadblock for developers,” says Mohit Goel, MD, Omaxe Ltd.
Tax Relief: Another expectation is to extend the tax relief to homebuyers by raising the tax deduction limit of home loans from Rs 2 lakh per annum to Rs 5 lakh per annum. This would have an encouraging impact on homebuyers, especially first-time buyers across the nation.
Tier 2/3 Cities as Growth Engine: Tier 2/3 cities have emerged as a key contributor in driving the sector’s growth in 2021 and to support this growth graph, the government should not only aggressively push for infrastructure developments but also relax the definition of affordable housing, both in terms of value and size, to cater to a large population that has gone back to their hometown.
More PPPs & Incentives for Large-Sized Real Estate Development: Huge investment and collaboration through Public-Private Partnership (PPP) in infrastructure and urban development will give impetus to the country in doubling its economic potential and catering to growing urbanization. “The government should bring reforms and incentives to encourage more participation from the private sector. Besides, special incentives for real estate developers to undertake large-size projects should also be considered in the budget as this will give a much-needed fillip to the development of urban clusters, habitation, and also provide employment opportunities,” observes Goel.
A majority of developers expect the government to announce constructive reforms for the real estate sector — ranging from hike in tax deduction limit on home loans to single window clearance mechanism — which will help it grow manifold.
Mukul Bansal, Director, Motia Group, says, “The Indian economy is headed towards a V-shaped recovery and we hope that the Union Budget 2022 will meet the expectations of the sector perfectly. To accelerate the growth of the sector and enable more homebuyers to fulfill the dream of owning a house, we expect more announcements for tax relaxations such as the limit of tax deduction given to home loan borrowers to be increased from the current Rs 2 lakh to Rs 5 lakh. In the affordable housing segment, efforts should be made to empower homebuyers who look forward to this segment for a secured future and stability. Providing a single window clearance mechanism and recognizing the real estate sector by awarding it with the infrastructure status can significantly boost the sector’s confidence.”
Key Expectations for Commercial Space
So far as the commercial space is concerned, developers are looking for lowering of the GST applicable for commercial properties developed for leasing to reduction in TDS deduction rates on co-working spaces.
“We expect the Union Budget 2022 to play an enabling role for the realty sector. The Serviced Office Space sector has started experiencing an upsurge in demand lately. India’s growing need for relaxation in taxation would be helpful in the further development of the sector. In the new budget, we are expecting a reduction in the TDS deduction rates on co-working spaces. Also, a consideration to bring co-working spaces into a 2% TDS slab will immensely help in managing the cash flows,” says Vineet Taing, President, Vatika Business Centre.
The boost from the government through the Digital India Scheme has helped accelerate the technological growth of the segment, and the evolution of the sector continues as the government focuses on Atmanirbhar Bharat. “We expect the government to bring reforms that will enhance this focus. It can only be achieved when we encourage more start-ups, well-defined office spaces, target smarter offerings, digital advancements, and complete hygiene,” adds Taing.
Developers say the commercial realty segment has witnessed significant transformation in the last two years and continues to evolve owing to the uncertainties. “With the government focusing on Atmanirbhar Bharat and making the country a USD 5-trillion economy by 2025, we expect them to enhance the ease of doing business and bring reforms to further augment the manufacturing sector. And to achieve this, India would require high-quality offices and a big chunk of investment. Boost to start-ups and MSME will also support the growth of commercial realty,” says Abhishek Pandey, Vice President-Customer Engagement & Distribution, Viridian RED.
The government, therefore, should consider facilitating tax incentives, adequate infrastructure, establishment of dedicated clusters in propelling the growth of start-ups and the MSME sector. “These moves are further likely to boost the growth of the commercial realty segment. We also expect the government to look into the long-pending demand of single-window clearance for the realty sector as this will help in streamlining the multiple approval processes,” he says.
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