An expansionary Budget for the Real Estate to firm up: Colliers

by Shrutee K

Mumbai, 13 January 2022: The first advance estimates of the government projects India’s GDP to grow at 9.2% in 2021-22 after a steep contraction of 7.3% in FY 21. While the economy is recouping its losses from Covid-19 with encouraging growth across manufacturing, mining, construction and services sectors, the impact and intensity of the third wave continue to be monitorable. The latest economic indicators are hinting towards an urgent need of demand stimulation measures to sustain the economic recovery. The Government should look at ways to boost private consumption and incentivise the real estate sector in the upcoming budget.

The government’s support in the form of liquidity infusion, fiscal support and reform-driven investments was timely to keep the real estate sector amongst others to remain afloat and recover. There is a need for the continuation and introduction of tax sops and incentives to prospective homebuyers, investors, and developers at large.

Colliers’ experts expect the below from the Budget 2022

·         “Budget 2022 should continue to focus on expansionary policy measures to boost consumer spending and investment. Measures to boost affordable and mid-income housing in the form of extension and expansion of tax benefit for first-time home buyers, sops for developers engaged in affordable housing & rental housing projects will have a positive domino effect on the real estate sector and the overall economy. In line with India’s ‘net zero’ targets, the Budget should lay a road map for ensuring sustainable real estate development through financial & non-financial incentives.” – Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers. 

·         “While the real estate sector is looking at a robust housing demand revival in 2022, it is expected that the Union Budget 2022 will play a supportive and enabling role. The demand for bigger housing loans has increased and the expectation is that tax exemption should be relooked to Rs. 5 lacs.  Additionally, a GST waiver for under-construction properties, and incentives for private investment in the affordable housing sector will be encouraging, while  tax exemptions for notified rental housing projects will accelerate the pace of investments in this scheme and help in achieving “Housing for All” objectives too. The real estate sector’s long-standing demand to widen the definition of affordable housing to include houses priced more than Rs 45 lakhs in big metro cities is expected” – Piyush Gupta, Managing Director, Capital Markets and Investment Services, Colliers India.

·         “Industry status for the real estate sector will help the sector to access cheaper funding. After a resounding year of the residential sector, the developers' community would hope for liquidity infusion, particularly for incomplete projects. It will also be important to introduce tax incentives to promote rental housing of which Student Housing and Senior Community Living are also a part. We expect a push for rental housing, it will be interesting to watch if 80IBA exemptions are reintroduced. The industry would also expect certain policy directives to bring more FDIs into the sector through Tax rationalization” – Subhankar Mitra, Managing Director, Advisory Services, Colliers India.

·         “Real estate sector witnessed a period of recovery which is likely to be derailed by the current pandemic wave. Tax concessionary benefits pertaining to affordable housing, increasing tax set-off for housing loan interest payment under sections 24, 80EE and specifically increasing the standard deduction which could increase the cash available through savings for taxpayers. These combined with more specific curative measures like long-term capital gains period be reduced for REITs and increase the total deduction available under 80C where the home loan principal repayment deduction is allowed, will increase investment into real estate. The Budget should relook at the capital gains taxation of the profits arising from the transfer of shares (held as an investment) in entities holding immovable assets especially in M&A where sick units with assets are being taken over either from insolvency or SARFESI based resolutions. This could free capital for entities in the real estate business which could be reinvested for newer ventures and promote the growth of the sector” – Ajay Sharma, Managing Director, Valuation Services, Colliers India.  

·         “Real estate is one of the key pillars of the economy and has shown complete resilience during the pandemic. However, the warehousing sector has been dented by growing input costs due to the price increase in raw materials such as cement, steel, etc. Raw material prices are increasing by the day and it is hurting the growing sector. To give the development a boost a move to reduce GST rates for construction materials can give a lot of relief to the warehouse developers and will directly help to give a much-needed thrust to the sector” – Shyam Arumugam, Managing Director, Industrial and Logistics Services, Colliers India.

While the real estate sector has gained most of the lost ground, most of the segments especially housing, the commercial office continue to trail below the pre-Covid levels. Real Estate will play a key role in Budget 2022 that will help the developers, economic recovery and job creation.