Pre-Budget Expectation Quote| Colliers | India Sotheby’s International Realty | Square Yards | Signature Global
Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers
“The Union Budget 2023-24 is highly anticipated by the real estate sector to keep up the momentum seen last year. While many expectations on the residential side can aid homebuying, we believe that some push on the commercial office side will go a long way in overhauling and improving the ease of doing business. For instance, clarity on the proposed DESH Bill will give impetus to businesses catering to domestic demand. To achieve India’s target of becoming a USD5 trillion economy by 2026, DESH hubs can play a huge role in strengthening the domestic manufacturing infrastructure. India’s domestic consumption is growing by the year, and a pro-investor policy for investment hubs can take India’s manufacturing abilities to the next level”
Mr. Amit Goyal, CEO, India Sotheby’s International Realty
Maintaining India’s GDP growth at 6.5-7 percent in a year when several global economies may face recession, should be the big focus of 2023 Union Budget. We are expecting a bold, growth oriented budget with announcements that will encourage capital investments and FDI inflows in India. In Real estate, we must keep demand for homes intact as housing is an accelerator for 200 plus ancillary sectors. I do believe raising the tax breaks on interest and principal amount on home loans from 2 to 5 lakhs will be the most welcome move for the industry and home buyers alike. That will cushion the blow of rising home loan EMIs. This has been the industry’s long-pending demand and there’s no better time than now to do so.
Piyush Gupta, Managing Director, Capital Markets and Investment Services, Colliers India –
Increase in tax deduction limit on home loan interest: Currently, homebuyers can claim an income tax deduction on the interest paid on their home loan. The maximum amount of deduction that can be claimed is Rs 2 lakh per financial year for a self-occupied property. There is a need to provide financial benefits to Home Buyers to boost Housing Demand across Mid and Affordable Housing and the benefit of Rs. 2 lacs could be evaluated to be increased to Rs. 5 lacs.
Separate tax deduction section on principal repayment of housing loans: Currently, Homebuyers can claim an income tax deduction on the principal repayment of their home loan. The maximum amount of deduction that can be claimed is Rs 1.5 lakh per financial year. However, various deductions for other investments such as Public Provident Fund (PPF), equity-linked savings schemes (ELSS), and life insurance premiums. There is a need to increase the limit of Rs. 1.5 lacs and separate the Housing Loan repayment benefit and to be dealt with it separately. This not only spurs housing affordability and also stimulates savings
Increase in the affordable housing price band: There is a need to relook and increase the current price band of Rs 45 lakh for a property to be considered under affordable housing. A price band of Rs 45 lakh or below is low in a city like Mumbai, Bangalore, or Gurgaon is too low and should be increased to be made according to the city’s pricing and affordability. The limit needs a relook considering this hasn’t changed for many years and ready reckoner price, raw materials cost has increased.
Parity of Capital Gains benefits between Real Estate and Capital Markets Investment: The tax on Long Term Capital Gains accrued from the sale of a property is higher at 20%, compared to equity shares. Also, the period of holding of house property for long-term capital gains is 36 months vis-à-vis 12 months for Listed Equity Shares. There is a need to bring Taxation parity for Real Estate Investments as compared to Equity Capital Markets products.
Taxation on Interest Income from REITs/ InVITs for Foreign Investors: Foreign portfolio investors (FPIs) would expect clarity in Budget 2023 on the tax to be paid on interest income earned from investments in real estate investment trusts (REITs) and infrastructure investment trusts (InvITs). FPIs are currently taking a conservative view and have been paying a higher tax of 20% for such income. This is because the amendment in the definition of ‘securities’ in the Securities Contracts Regulation Act (SCRA) extends to the units of REITs and InvITs as well. Interest income distributed by a business trust to non-resident unit holders attracts a tax of 5% plus applicable surcharge and cess as per the Income Tax Act. The objective of introducing a specific tax regime for business trusts was supposed to boost investment in REITs and InvITs.
Shyam Arumugam, Managing Director, Industrial and Logistics Services, Colliers India –
The logistics sector has been one sector that has emerged as the most resilient sector during the pandemic and has been the most active ever since. Robust e-commerce demand coupled with a rebound in manufacturing has been the key driver for this sector. However, all is not rosy in the sector given the escalation of land costs, and input costs, especially that of steel and cement. This has put up a great strain on developers of large-scale infrastructure. With demand, rebound supply addition was unable to match up, leading to a limited supply of Grade A warehousing in preferred corridors. With this as the background, some of the expectations from the budget would be the following:
Piyush Bothra, Co-founder and CFO, Square Yards
Real estate is one of the most important sectors for growth and job creation. This sector has seen positive trends after a prolonged bear phase and expects a good handholding in the upcoming Union Budget 2023 from the government at this critical juncture. Given the rising interest rates and overall inflation, property buyers want the standard Rs 2 lakh tax deduction on interest paid on home loans to be increased to Rs 5 lakhs as it will bring more salaried people in the bracket and help realize the dream of first-time home buyers. Further, there should be a ticket-wise criterion for the affordable housing in metro and non-metro cities that tallies with local market realities. The Rs 45 lakh limit should be increased to Rs 80 lakh in metro cities and 60-65 lakh in non-metro cities so that more homes are within the affordable price range and people can take benefits of lower GST rates, government subsidies and tax deduction benefits on home loans.
- Reduced duties for key construction materials that would render lower construction costs for developers of good quality investment grade infrastructure required to augment this sector
- capital subsidy/financial subsidy for the development of compliant warehousing in key cities
- better capital arrangements for developers who are developing warehouse/multi-modal logistics parks focused on last-mile delivery in Tier II / Tier III towns
- lower GST for emerging tech development on trucking and automation related to warehousing as automation is still nascent in India
- enable clarity on the DESH policy to enable stakeholders to better plan existing underutilized SEZ assets, which can free up lots more land banks in the country
- Planned incentives for developers adopting green warehousing concepts
- These can provide a much-needed boost to the industry in the year to come as the various stakeholders are strategizing for embracing the long-term growth story.
Mr. Pradeep Aggarwal, Founder & Chairman, Signature Global
Real estate, especially the residential segment, has bounced and is playing a significant role in bringing momentum to the economy.
Government should reconsider the loss set-off limit under the income tax head house property. Earlier there was no such limit, but in the Finance Act 2017, government restricted the amount of loss to up to Rs 2 lakh per year under the head House Property which is allowed to be set-off against Income from Other Sources. This limit should be removed or enhanced to bring back investors in the sector, this will eventually support the rental housing market to meet demand.
Besides that, keeping in view high inflation and significant rise in borrowing cost in the last few months, there is an urgent need of tax sops, especially for home buyers in affordable and mid-segment housing, to overcome the financial hardship.
I think the government should enhance the deduction limit against interest payment on home loans. For home buyers in the affordable housing segment, entire interest on home should be allowed as a deduction.