The budget announced for 2019-20 glorified affordable housing more than offering few taxing solutions for the home buyers. Long-term expectations like industry recognition for the sector, single-window clearance were not been addressed and discussed in the last budget. That is why, this year, most of the real estate developers are expecting that these important factors must be addressed so that the sector can reinvigorate. Even though the announcement of INR 25,000 crore has given some relief to the sector, homebuyers’ growing interest to buy a project will be a major boost to the sector.
Tax Deductions
Hon’ble Finance Minister Nirmala Sitharaman, during her first maiden budget, announced an increase of INR 3.5 lakh tax deduction cap on the interest paid on home loans approved for the acquisition of the first home purchase up to Rs 45 Lakh in the financial year. It is good that the government is promoting affordable housing to fulfil the promise of “Housing for All by 2022” under PMAY scheme. But the missing factor is the benefit for the middle-class population. The Government did not address the housing concerns of the mid-segment population apart from strengthening RERA. Therefore, developers are looking at tax and interest benefits for the mid-segment which will help in increasing the sales.
Reduction in GST rates on construction materials
Construction material cost is directly dependent on the cost of raw materials and procurement charges. Although the government has reduced GST rates for the affordable and under-construction buildings, the materials like cement (28%), sanitary items (18%), steel, doors, windows, electrical continue to pose a challenge due to the high GST rates. The industry requests the government to reduce the inputs and input services tax to 5% – 12%.
RERA to consider multiple tower projects as an ongoing venture till the completion
In an integrated township project, until the construction of all the towers gets completed, RERA should consider it as the ongoing project. This will help in maintaining the GST rate of under-construction projects.
Loan Crisis
Funding has always been a critical challenge faced by the realty sector in India. Due to the lack of appropriate funding received from banks, real estate developers are now approaching NBFCs, which also has crumbled recently. This has impacted the borrowing cost and easy access to credit availability. The government should make some fundamental changes which will further increase foreign investments and solve the liquidity problem in the sector.
Repo rate deduction
Although the repo rate has been cut 5 times in India, it has not been passed on to the buyers practically. Therefore, potential home buyers are not witnessing any reduction in home loans.
