Union Budget 2021: India's realty sector nearly cripples for want of liquidity as FM spurs hope

The real estate sector is confronting crippling liquidity for a long time. A relaxation in norms for raising capital, tax incentives for home buyers, reduction in housing finance cost through preferred interest rates, continuing subsidies under Pradhan Mantri Awas Yojana (PMAY), and paving the road for the quick availability of Alternate Investment Funds (AIF) are some of the relief measures the sector expects. These initiatives will put more money in buyers’ and developers’ hands, stoking the revival in the sector.

This is what real estate firms shared with Firstpost on Budget 2021:

Alok Saraf, Associate Partner, Grant Thornton Bharat LLP

The real estate industry, passing through a protracted recession even before the pandemic which worsened it manifold, pins its hope on the Budget for swift revival. The sector expects a two-pronged approach from the Budget — a just GST regime for the industry for bringing down the cost, and ample liquidity for generating demand. A rational GST regime, with temporary waiver or reduction in GST rate for retail home buyers and allowance for availing input credit during the construction of commercial properties to commercial leasing and rental segment, will pare down the construction cost for the sector leading to a boost in demand.

Shishir Baijal, Chairman and MD, Knight Frank India

Section 80 C tax deduction on home loan principal repayment does not provide for a focused benefit on housing. A separate annual deduction of Rs 150,000 will provide the much-needed fillip to opt for house purchase. The credit linked subsidy scheme (CLSS) has ensured a remarkable increase in the activity level in the affordable housing sector. Given the COVID-19 pandemic disturbances and a likely two-year time frame for the economy to recover from the impact, the deadline for the CLSS scheme should be extended by two years up to 31st March 2023. Given the relatively higher house prices in major cities, the upfront amount of the CLSS subsidy should be increased to Rs 3.5 lakhs (from the current level of Rs 2.3-2.67 lakhs depending on the income category) with corresponding enhancement in income criteria which shall make the subsidy amount more significant in comparison to the house value.

Ashok Mohanani, President – NAREDCO, Maharashtra

Developers and buyers hope that the upcoming Union Budget will introduce reforms like tax sops and correction in prices which will further benefit and stabilise the industry. The industry expects if 1 percent GST for affordable housing can be extended for another fiscal year along with the removal of Rs 45 lakh cap will surely be a great deal for the Affordable Housing segment; from the perspective of first-time homebuyers, we expect the full benefit of interest to taxpayers should be provided; look forward to re-introduction of GST with an input tax credit on under-construction properties which will generate the demand among homebuyers.

Farshid Cooper, MD, Spenta Corporation

While the government and the concerned authorities have been introducing initiatives and measures to alleviate the stress faced by the sector, we hope that Budget 2021-22 is a ‘comeback’ Budget for the Indian economy. The focus should be on the added impetus for affordable housing, addressing the liquidity concerns that currently plague the industry and tax breaks or reduction of transaction costs for home buyers.

Rohan Khatau, Director, CCI Projects Pvt. Ltd

The government should consider lowering the GST rate for under-construction projects. This move will incentivise home buyers to purchase their dream home and boost sales, thereby contributing to the GDP. The Maharashtra government’s move to cut stamp duty is an exceptional example of how it helped revive residential sales. We expect rapid infrastructure development to magnify real estate in MMR.

Sanjay Daga, Chief Operating Officer, Runwal

The last few years have witnessed a major downfall in the real estate sector owing to demonization, GST, RERA, NBFC crisis. The government’s move in giving infra status to affordable housing would be beneficial to the buyer by providing them with reduced and long-term funding with easy approval of loans. The benefits of tax waivers in stamp duty, and lower home loan rates will play a pivotal role in generating demand in the upcoming year. Also, there has been a relaxation given to the developers on the hefty premiums. This will help them with cost optimisation and avoid project delays and in turn benefit the customers.

Murali Malayappan, Chairman and MD, Shriram Properties Ltd

The realty sector is expecting the government to accord industry status to the sector as a whole. This is a long-pending demand that would infuse much-needed liquidity by including the sector in the priority lending list of banks and other financial lending institutions. Faster implementation of alternative investment funds (AIF) can also rescue the stressed residential projects. Completion of stressed projects will improve homebuyer sentiment and boost demand.

Krish Raveshia, CEO, Azlo Realty

In Budget 2021, we expect measures like continuing with the current low interest and easy liquidity regime. A low-interest rate is a direct stimulus for investment in real estate. We would like the Budget to deliver on measures to boost demand for the industry like enhance the limit of deduction under section 80C of income tax for principal repayment on home loans, a separate exemption for principal repayment on home loans to incentivise investment in real estate. The investment of up to Rs 50,000 in REITs should be allowed as a deduction under Section 80C. Besides, the holding period for REITs to qualify for long-term capital gain should be reduced from 36 months to 12 months, a step which will spur retail investment in a value-creating instrument like REITs.

T Chitty Babu, Chairman and CEO, Akshaya Pvt Ltd

Measures like single window clearance, uniformity in GST for different housing segments, ease of cash flow for better project executions, strengthening the banking infrastructure to aid the developers as well as the homebuyers can go a long way in creating sustained growth. Revision in income tax slabs can spur buyer sentiment which was marred by COVID-19 .

Ashish Deora, CEO and promoter, Aurum Ventures

In Budget 2021, we expect an increase the tax rebate on housing loan interest under Section 24 of the IT Act to Rs 6 lakhs from current Rs 2 lakhs, increase in reduction in Section 80C to Rs 2.5 lakh a year. Both these initiatives will put additional liquidity in the hands of home-buyers which would further boost demand.

Chintan Sheth, Director, Ashwin Sheth Group

We hope the Budget addresses some of the critical issues such as speeding up infrastructure development to improve connectivity to various emerging micro-markets, GST waiver on under-construction projects for under-construction residential development, and ease the cash flow and capital generation options that will support developers to complete constructions on time.

Navin Makhija, Managing Director, The Wadhwa Group

The forthcoming Budget will be crucial in terms of reforms and we believe that the government will take appropriate measures to spur consumer demand. More tax sops and higher relief on home loan rates will woo homebuyers and investors to buy property. Additionally, interest rates on housing loans should be reduced to benefit a broader segment of homebuyers, including first-time buyers. The Income Tax benefit for housing should not only be for residential purchasers alone but should also be extended towards commercial purchasers as well. This can help the sector recover from its liquidity woes to a larger extent.

Reeza Sebastian, President – Residential, Embassy Group

The government should consider reintroducing the GST Input Tax Credit (ITC) that will decrease the tax liability of the developer which will allow the latter to reduce the cost of construction and infuse affordability. In the context of consolidation, relaxation on GST for joint development transaction on T.D.R will be a huge benchmark for developers to undertake projects for development. The government should consider increasing tax sops on the purchase of residential units that would help create a ripple effect on the overall economy. Following the Maharashtra model, other states should cut stamp duty to create a win-win situation for all stakeholders.

Rohit Gupta, CEO, Mantra Properties

In Budget 2021, we wish to see uniform taxation, single window clearance for schemes and availability of more financing options. Consumer affordability can also be enhanced through increased tax relief measures and lowering interest rates. The GST on construction materials currently impacts the construction costs significantly and affordable homes are not affordable. A rationalised GST bracket with Input credit will help the government work quickly towards Housing For All mission with cost-effective homes.

Uddhav Poddar, MD, Bhumika Group

We expect the government to allow for the availing of Input Tax Credit of GST charged on construction of rented property and utilise the same towards the payment of GST on the lease rentals. We also want the government to focus on infrastructure development of tier 2 and 3 cities and make these cities ready for the next round of urbanisation. Accord the long-awaited industry status to the real estate sector as after agriculture, construction is the biggest job generator and employs the largest number of workers. We expect stamp duty to be subsumed into GST to incentivise home buyers and the overall property market sentiments.

Abhishek Jain, Chief Operating Officer, Satellite Developers

The government should consider revising the tax exemption limit for individuals under Section 24 from Rs 2 lakh to Rs 5 lakh as it will help increase the purchasing power of the homebuyers. GST should re-introduced with input tax credit on under-construction properties as that will help in bringing down the cost of construction resulting in reduced property prices in the market.

Milind Korde, Founder and MD, Ananta Landwise

The government should consider relaxing individual income tax limits by raising the exemption limits with respect to home loans pertaining to both the interest and principal components. This would enable more disposable income in the hands of homebuyers. Additionally, reducing the GST on raw materials like cement, which are required for construction would also create a tremendous impact on boosting the demand in the housing sector.

Abhishek Bansal, Executive Director, Pacific Group of Malls

The retail segment is looking at measures that could ease out the tax burden on people. Retail activity is one of the crucial aspects of the economy, and the segment would be eagerly waiting to hear about sops that could help it overcome the challenging times of the pandemic.

Ashish Bhutani, MD, Bhutani Group

We expect the government to come out with steps to address the liquidity issue, and fund allocation for infrastructure in the metro peripheral areas. The help would entail measures such as bringing the real estate sector in the banks’ priority list and extending industry status to the whole sector.

Anand Shukla, Managing Director, Ocean Infraheights (Golden I)

From a commercial real estate perspective, we are looking forward to reforms and incentives that provide encouragement to the manufacturing, startup sectors, etc.; offer interest or capital subsidies on systems and equipment for all players looking to invest in technology, sustainable building and digitization of operations. We hope that the central and state governments can work together and take a look at reducing GST, stamp duty and circle rates.

Prashant Solomon, Managing Director, Chintels India;Treasurer, CREDAI NCR

After a challenging 2020, as we enter 2021, there is a need for some more fiscal measures in the upcoming Budget to accelerate growth in this important sector that generates demand for around 250 other industries. Further extension of the CLSS scheme for the next fiscal year, increase in tax incentives for home buyers, infrastructure status for the entire real estate sector and abolishing tax on unsold homes are some of the key demand of the industry. States on their part must cut stamp duty on registration of properties, as Maharashtra has done. If the government announces some positive measures on demand side in the Budget, housing sales will bounce back to reach pre-COVID level.