The union budget (scheduled release on February 29, 2016 by Finance Minister Arun Jaitley) is the center of attraction these days as the whole nation is staking high hope on his budget. Among others, real estate industry watchdogs are also pitching hopes on the upcoming budget, anticipating some development-centric announcements for real estate, including incentives, easy service tax, home loan benefits and others.
Cheaper home loans for financial safety
The finance minister is expected to include financial layer of safety measures for the buyers in light of the infinite delays being observed in the construction of a real estate project. This is expected to be a heck of crucial step aiming to trim down the level of decreasing sentiments in realty market. The unpredictable delays causing the failure in punctual delivery of the projects have degenerated once the stable sentiments of realty market into a low level discouraging one, thereby picturing a rather difficult scenario for the survival of real estate industry due to resultant slowdown and poor sales of inventory.
As a curative step to this problem, the government has to grant financial security to the buyers from the project delays, say for instance, tax deduction limit (currently it is Rs 2 lakh) for home loans should be brought down for homebuyers in metropolitan cities. The existential limit doesn’t fit in the ticket sizes of houses costing beyond Rs 1 crore in big cities like Mumbai. There must be concessions on tax for housing insurance premiums so that end users could feel motivated to insure their properties.
“The Union Budget should pay specific heed to this pressing need. On purchase into an under-construction property, buyers can only claim tax benefits of Rs. 2 lakh after possession if construction is completed within three years. The benefits reduce to Rs. 30,000 if the builder delays construction beyond this – and they pay higher interest. First-time home buyers purchasing properties for self-use additionally pay rent,” said Anuj Puri, Chairman & Country Head, JLL India (source: ET Realty)
Tax benefits for homebuyers at the time of paying premiums for housing finance
In contrast to the existential tax concessions for homebuyers that they avail after taking possession of their properties, there should be an inclusion in the union budget allowing homebuyers to avail the tax benefits from the time they start paying interest on their home loans. This step, if taken, will be extremely helpful for the buyers as they would be able to ease off their financial burdens and will simultaneously boost up the volume of home loans repayments. Besides, the market sentiments will undoubtedly witness surge thereof.
Meanwhile, the provision to give tax exemption to the buyers on the purchase of an under construction property from the capital gains is also being recommended. It outlines that the under construction property must be completed within 3 years of its sale if purchased out of capital gains, so that the buyers could avail tax benefits thereof. In case the construction doesn’t meet the deadline as specified down o agreement papers, the timeline is recommended to be extended for five years from the prevailing three years.
Promote green housing
Currently India doesn’t have satisfactory number of green housing projects owning to builders’ reluctance to indulge in such venture, considering the notable sign of low demands as buyers avoid paying additional premiums for these projects. The government of India should bring in a policy to provide a slew of incentives for this segment, thus motivating potential buyers to invest in green projects as well.
The union budget 2016 should deliver convincing benefits to the buyers so that investment in green realty picks up height and stakeholders in residential real estate sector feel optimistic, thereby increasing the sentiments of the market in this segment.
No development in real estate sector of any country is possible if its pace for infrastructure development is at low level. Therefore, if Indian realty industry is to seek substantial growth, there has to be top of the line infrastructure expansion aiming to streamline civic connectivity broadly in various outlying areas of metro cities. This on the other hand, will promote affordable housing and bloat up the bubble of market segments signifying notable transition in the sector.
Moreover, NDA government’s flagship housing scheme ‘Housing for all by 2022’ will get its wings of development through powerful infrastructure developed across the nation’s realty spectrum.
The real estate sector is the second largest employment sector after agriculture in India. Quite essentially, this sector can’t be given the cold gesture at any cost and development to uplift its condition from the current plight is the most pressing need that the government must put on higher priority. We hope that honorable Finance Minister will take due considerations, and initiatives to stimulate the growth of real estate sector will be taken in the upcoming Union Budget 2016.