A country’s budget is nothing but an annual income and spending plan that concerns the welfare and development of every citizen and its enterprises. While it may appear like a routine affair, nothing about this year’s document is ordinary.

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Everyone, be it individual or corporates, have high expectations — in terms of stimulus steps to spur demand in the economy, which is in a recession due to the fallout of the pandemic.

Like every other sector, the Indian real estate industry is pinning big hopes on this year's budget to get much-needed stimulus that can help it to recover from the onslaught of the pandemic quickly.

As per our recent report, housing sales fell 47 percent in the 2020 calendar year in the primary markets of eight major cities from the previous year, even as the demand started to improve gradually from June onwards, when the economy started to unlock after over two-month long strictest lockdown.

Housing sales rose sharply during the October-December period on pent up and festive demand. The Mumbai and Pune market saw good recovery thanks to the state government's decision to temporarily cut stamp duty on registration of properties. High registration numbers in Maharashtra proved that policy impetus can lift buying sentiments. As revenues of Maharashtra government were not impacted because of stamp duty cut, builders have started requesting other State governments to follow suit.

From the central government, the industry's wish-list for the upcoming budget is long and exhaustive.

Need to boost demand for 2021:

Seeing the success of Maharashtra government's stamp duty reduction, there is a strong case for the Centre to consider giving more tax incentives to home buyers to boost demand for residential properties.

Increasing the tax deduction limit for both principal and interest on home loans under the different section of income tax will encourage people to buy homes.

The Credit Linked Subsidy Scheme (CLSS), under which interest subsidy up to Rs 2.7 lakh is being offered, for the middle income group should be extended in the next fiscal as well.

As part of the Atmanirbhar 3.0 initiative, the government last year increased the differential from 10 per cent to 20 per cent under Section 43CA of the Income Tax Act on sale of residential units valued at up to Rs 2 crore. The home buyers will be entitled for relief of up to 20 per cent under Section 56(2)(x) of the Act. The government should remove the Rs 2 crore price limit and also extend the concession to non-residential properties.

Case for boosting supply side:

There is a case for re-introduction of the subvention scheme, under which builders bear home loan interest on behalf of the customers for a certain period of time. These measures will give an impetus to the real estate sector and around 250 other industries linked to it.

For developers, it's high time that the government stop taxing unsold properties. More tax incentives must be offered to develop affordable housing, senior living and rental housing (co-living/student housing) projects.

The RBI has announced a loan restructure scheme, but rules need to be relaxed for any real benefits, otherwise many projects will become bankrupt and go into litigation.

In 2019, the Centre had created a Rs 25,000 crore fund to help complete stalled and stressed housing projects. Industry needs at least 4-5 such funds, given the liquidity conditions.

Rationalisation of raw material prices is key for the growth of the sector as developers can not increase the prices of final products in a sluggish market.

These are some of the recommendations that the government can look at in the upcoming budget.

Interest rates on home loans are already at a low level and developers are offering discounts as well as attractive payment plans to lure prospective home buyers. But that is not enough. The real estate sector, which has been facing tough times ever since demonetisation happened, needs support from the government in this budget to get back on its feet and reach at least pre-COVID level in terms of sales velocity.

Top eight cities have an unsold housing inventory of over 7 lakh and builders need to clear it as quickly as possible. At current sales velocity, it will take nearly four years to exhaust these unsold stocks. Therefore, it is imperative for the government to make some demand-side intervention. The Finance Minister has already indicated that its going to be a “never before” like Budget this year. This promise has given the industry lots of hope and optimism at a time when the government is hard pressed on finances.

-Author Vikas Wadhawan is Group CFO, Housing.com, Makaan.com and Proptiger.com

First Published:Jan 25, 2021 5:29 PM IST