The Indian real estate sector suffered a blow from COVID-19 pandemic and the ensuing lockdowns. The industry is banking on budget 2021 for a revival of fortunes. State governments have chalked out a few initiatives to boost housing demand, and builders have offered lucrative offers. But a lot is still work in progress.

NoBroker.com’s annual real estate report suggests that 82 per cent of people are likely to buy a property in 2021. This indicates a brighter year ahead. However, the forthcoming budget could add a lot of momentum and spruce up sales and rental activities.

Making under-construction properties more lucrative

Almost 84 per cent of the people surveyed across cities mentioned that they prefer ready-to-move-in houses. There are more than 15 lakh under-construction properties in the top eight cities. Removing or reducing GST or allowing Input Tax Credit (ITC) so that builders can bring down prices will help boost demand.

Incentivising affordable housing

NoBroker platform has observed an increase in demand for properties priced above Rs 80 lakh. Demand for affordable housing has not picked up as expected. Additional incentives for affordable housing should be announced in the upcoming budget to boost demand. A fund was created in September 2020 to give relief to homebuyers of stalled projects by providing last-mile funding to affordable and middle-income housing projects. The fund needs to be continued as more capital needs to be allocated to ensure a larger number of projects. The budget needs to revise the affordable housing limit from Rs 45 lacs to Rs 75 lacs for tax exemptions and GST. It isn't easy to find a property within 45 lacs in metro cities. The government could also consider continuing PMAY to provide impetus to affordable housing.

Make real estate an investment class

The NoBroker report indicates that 89 per cent of people are looking to buy a property for end-use and not for investment. However, India needs more than 25 million new homes to account for rapid urbanisation leading to increased housing demand. The government could announce measures to make real estate an investment class by giving tax benefits on a second home. Standard deduction of 30 per cent on net rental income should also be revised. These measures, along with Model Tenancy Act 2019, can help make real estate an investment class once again.

Faster clearance of projects to reduce costs

This has been a long-standing demand by the sector. The issue impacts delivery timelines which cause financial losses to the builders and homebuyers. If processed through single window clearance, the multiple approvals could significantly cut down construction costs and avoid delays.

Tax Sops

80C: Deduction on the principal amount of housing loan repaid should not be clubbed with other deductions under Section 80C. The deduction should be allowed separately over the limit of Rs 1,50,000 under Section 80 C. Alternatively, the limit under Section 80C should be increased.

1. 80EEA: Extend the period for home loan interest payment deduction of Rs 1.5 lakh beyond March 21. The maximum value of affordable homes should be increased from Rs 45 lakh to 75 lakh.
2. Section 24: Budget 2021 could revise the limit for deduction of interest on housing loan under Section 24 (b) from the current Rs 2 lakh to Rs 10 lakh. The increase in the ceiling limit would incentivise buyers

Incentivise rentals

A lot can be done in the rental segment. Cities have an ever-increasing housing requirement due to urbanisation, and 25 million more homes would be required by 2030. The Model Tenancy Act could be brought in motion to sort out multiple housing issues in the rental space. There is a need to rationalise large deposits being charged from tenants. The government also needs to resolve squatting issues faster, giving landlords comfort in renting out properties and investing in second homes for rentals.

Benefits for Tenants

The budget could include the following policies in the interest of boosting rental segment:

1. Approve higher HRA to promote rental
2. Reduce Society Living Costs - 61% of tenants surveyed across top six cities prefer society living to independent houses. Society living could be made more affordable by removing GST on maintenance charges collected from residents

The government needs to help the sector, the third-largest employer, recover faster.

The author is Co-founder and Chief Business Officer of NoBroker.com

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