The real estate sector in India took a hit after the outbreak of the COVID-19 pandemic when housing sales dropped significantly across major cities. However, the sector has been witnessing a revival as housing sales picked up in 2022 and increased by nearly 50% as compared to the previous year. With the Union Budget 2023-24 set to be announced by Finance Minister Nirmala Sitharaman on February 1, the real estate sector is looking forward to getting a further boost in demand through favourable schemes and tax breaks.
The government aimed to provide housing for all by 2022 under its flagship Pradhan Mantri Aawas Yojna – Urban (PMAY-U). Several other initiatives have been taken to make houses more affordable. In 2019, the GST Council slashed the tax rate on affordable houses to 1% from 8%. The Goods and Services Tax was lowered from 12% to 5% for other categories of houses.
Currently, affordable houses are considered to be those in urban metropolitan areas having values up to Rs 45 lakh and an area of 60 square meters and less.
However, stakeholders in the real estate sector think that the Rs 45 lakh band is quite low given the rising prices of properties in metro cities.
“The government should seriously consider revising the price bandwidths for homes to qualify as affordable housing to align with the market dynamics of different cities. The size of units as per the current definition (60 sqm carpet area) is fairly appropriate, but the catch-all pricing band of up to Rs 45 lakh for affordable housing is definitely not appropriate across most cities,” Anuj Puri, Chairman of Anarock Group, told Financial Express.
Another demand in the real estate sector is some relief in the form of income tax exemption on housing loans. Currently, buyers can get income tax deductions for stamp duty and registration fees paid for the purchase of the residential property. But, the amount is included in the total exemption limit of Rs 1.5 lakh under section 80C of the Income Tax Act. This is applicable for ready-to-move-in properties and not on under-construction houses. Additionally, the taxpayers can also claim deductions upto Rs 2 lakh per annum on the interest paid on home loan under section 24(b) of the Income Tax Act.
Experts believe that a further increase is due in the exemption limit and the real estate sector is hopeful of a positive outcome in the Union Budget 2023.
An expansion in the eligibility of income tax rebates under Section 80EE of the IT Act is also expected. Currently, only first-time buyers can avail the additional tax benefit on home loan interest. Extending the benefit to other buyers could help improve the demand for houses and boost the real estate sector.
The rising cost of commodities like cement, steel and other construction material has remained a major concern for the real estate sector. Industry insiders are of the view that even a marginal drop in GST rates on construction materials could indirectly help the real estate sector by reducing the input costs and making the housing units more affordable for buyers.
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