With Budget 2022 just around the corner, the homebuyer community has also come up with a wish list like the other stakeholders. Most homebuyers urge the Finance Minister to incorporate income tax benefits, subvention schemes and stamp duty reduction to benefit the customers and economy at large.

As per the latest report by the World Economic Forum (WEF), India clocked a 12.7 percent growth in its Gross Domestic Product (GDP) in the third quarter of FY 2021-22. The real estate sector is said to contribute around 11 percent to the GDP and is the second-largest employer in the country. It is of pertinence that the Union Budget holds immense importance amongst the stakeholders of the sector, as it sets the tone for future developments in the year.

While the requests for ‘industry’ status to the entire sector and a single-window clearance mechanism for all projects have been in the pipeline, homebuyers also expect the Finance Minister to consider the following measures in the upcoming Union Budget 2022.

Tax benefits for homebuyers:

• Aimed at encouraging homebuyers to avail loans, the income tax deduction on home loans should be revised above the current amount of Rs 2 lakh. Commenting on the concern, Niranjan Hiranandani, Vice Chairman, National Real Estate Development Council (NAREDCO) states that, “Policy measures like the amendment in income tax deduction on home loan, if enhanced up to Rs 5 lakh, will help make 2022 the ‘Year of Implementation’ and augment the economic growth.”

• As per Ramani Sastri, Chairman and MD, Sterling Developers Pvt Ltd, “Income tax slabs must be revisited to allow a higher disposable income in the hands of a consumer. The appetite of homebuyers needs to be reignited through measures that target the existing demand. Personal tax relief that can be achieved either by tax rate reductions or amended tax slabs is the need of the hour. The Government should consider raising the rebate on home loan interest as that would provide the necessary liquidity to the tax payer.”

• Homebuyers must be encouraged to view realty as an investment. Thus, tax relief on a second or subsequent purchase is necessary. Sharing his opinion on the subject, Murali Malayappan, Chairman and Managing Director, Shriram Properties, says, “Incentivising housing purchase by liberalising Section 24(b) of the Income Tax Act, 1961, deduction on housing loan interest under Section 80C, and rental income exemptions, are a few measures that would significantly boost the housing demand and supply.”

• Presently, the Goods and Services Tax (GST) is individually charged on different construction raw materials. This spikes the building cost heavily, leading to higher prices for homebuyers. A single GST for all will help reduce property prices in the long run and bring transparency in the process. Further, it will fast-track the stalled projects that suffered due to cost overruns. Farshid Cooper, Managing Director, Spenta Corporation, states, “Stalled and pending projects deserve attention. As these projects begin to see the light of the day, the sector will have increased liquidity and the stuck capital will be free for investment. GST on input materials; however, may lead to escalated costs and inflate the prices in the long term, thereby softening demand.”

• The current tax holiday for affordable housing developers that ends with FY 2021-22 should be continued so homebuyers can be further provided with better rebates and lucrative schemes to invest in.

Expanding the price cap on affordable housing

At present, affordable housing is defined by residential properties priced at or below Rs 45 lakh. There is a need to revise this upper limit as prices, especially in metro cities, have undergone inflation, and real estate has been affected. A cap of Rs 50-60 lakh is recommended to drive the interest of homebuyers through various benefits.

Re-introduce subvention

In the absence of the subvention scheme, homebuyers availing loans have to pay the interest on the availed credit soon after it is issued. This is particularly hard upon first-time homebuyers as expenditure is doubled due to monthly rentals and EMIs. The lifting of the ban on subvention will motivate homebuyers to invest as EMIs will be due after property’s possession.

PMAY fund allocation revision

The Pradhan Mantri Awas Yojana (PMAY) was launched in 2015 with the target of housing for all by the end of 2022. Under the scheme, around six crore budgeted housing units in rural and urban areas were to be constructed. As per Pradeep Aggarwal, Chairman, ASSOCHAM National Council on Real Estate, Housing and Urban Development, “In the Union Budget 2021-22, we expect the Government to double the amount of fund allocation for PMAY to enable more people to realise the dream of homeownership. Also, the Credit Linked Subsidy Scheme (CLSS) benefits under the PMAY should be increased to cater to the Middle Income Group (MIG) segment as well.”

Extension of reduction of stamp duty and registration charges

Homebuyers welcomed the stamp duty rebates provided by State governments in West Bengal, Uttar Pradesh and Maharashtra during the ongoing FY. However, developers believe a standard rebate should be implemented across the country. Citing his observations, Abhishek Bhardwaj, Chief Marketing Officer, Shristi Infrastructure Development Corporation Ltd, “With the real estate industry slowly getting back to normalcy additional incentives like reduction in stamp duty will be advantageous to developers and provide the homebuyers an opportunity to register their properties.”

Overall, as the Finance Minister, Nirmala Sitharaman, prepares to table the Union Budget 2022-23 on February 1, the sector hopes for policies that usher in realty growth and economic development at large.