Industry status

From industry status to one-stop clearance, here’s what real estate expects from Budget 2022

A majority of real estate players are looking to FM Nirmala Sitharaman’s 2022 budget announcements with great hope as they believe that only a strong government hand can put the sector on a solid footing.

Hit hard by the pandemic amid an economic downturn and stagnating house prices for a few years now, property developers are betting big on this year’s EU budget to revive fortunes. Although home sales have started to pick up in recent months for a variety of reasons, including lower interest rates, a hybrid work model and buyers’ urge to move into a bigger, safer home, l ‘Commercial real estate still faces challenges. Additionally, small to medium-sized developers also face challenges in terms of reduced cash flow and credit availability.

No wonder, a majority of property players are looking to Finance Minister Nirmala Sitharaman’s 2022 budget announcements with great hope as they believe that only a strong government hand can put the sector on a solid footing. Here is what they expect from FM to give a boost to the sector:

Industry status and one-stop customs clearance: The 2022 EU budget should focus on strengthening the investment climate and streamlining taxation in the real estate sector. “We expect the government to respond to the sector’s long-standing demand for industry status and one-stop clearance in the next budget. Bagging the status of the industry will facilitate the real estate sector to avail legitimate and easy financing from banks and financial institutions. On the other hand, one-stop customs clearance will help speed up the construction and delivery process as delays in approvals continue to be a hurdle for developers,” says Mohit Goel, MD, Omaxe Ltd.

Tax relief: Another expectation is to extend the tax relief to home buyers by increasing the tax deduction cap for home loans from Rs 2 lakh per year to Rs 5 lakh per year. This would have an encouraging impact on homebuyers, especially first-time buyers across the country.

Tier 2/3 cities as engines of growth: Tier 2/3 cities have emerged as a key contributor to the growth of the sector in 2021 and to sustain this growth graph, the government should not only aggressively push infrastructure development but also relax the definition of affordable housing, at the both in terms of value and size, to meet the needs of a large population that has returned to their hometown.

More PPPs and incentives for large real estate development: Huge investments and collaboration through public-private partnerships (PPP) in infrastructure and urban development will give impetus to the country to double its economic potential and respond to increasing urbanization. “The government should introduce reforms and incentives to encourage greater private sector participation. In addition, special incentives for real estate developers to undertake large-scale projects should also be considered in the budget, as this will give a much-needed boost to the development of urban hubs, housing and also provide opportunities jobs,” observes Goel.

A majority of developers expect the government to announce constructive reforms for the real estate sector – ranging from raising the cap on tax deductions on home loans to the one-stop clearance mechanism – which will help it grow .

Mukul Bansal, Motia Group Director, said: “The Indian economy is heading for a V-shaped recovery and we expect the Union Budget 2022 to fully meet the expectations of the sector. To accelerate the growth of the sector and enable more buyers to realize the dream of owning a home, we expect more announcements of tax easing such as the tax deduction limit for home loan borrowers which will increase from Rs 2 lakh to Rs. 5,000,000. In the affordable housing segment, efforts must be made to give home buyers looking forward to this segment a secure future and stability. Providing a one-stop clearance mechanism and recognizing the real estate sector by awarding it infrastructure status can significantly boost the confidence of the sector.

Key Expectations for Commercial Space

With respect to commercial space, developers are seeking lower GST applicable to commercial properties developed for rental to reduced TDS deduction rates on co-working spaces.

“We expect the Union Budget 2022 to play a catalytic role for the real estate sector. The serviced office space sector has started to experience an upsurge in demand in recent times. India to ease taxation would help further develop the sector.In the new budget, we are expecting lower TDS deduction rates on co-working spaces.Also, consider integrating co-working spaces into a TDS slab at 2% will help enormously in managing cash flow,” said Vineet Taing, President of the Vatika Business Centre.

Government impetus through the Digital India Scheme has helped accelerate the technology growth of the segment, and the evolution of the sector continues as the government focuses on Atmanirbhar Bharat. “We expect the government to make reforms that will reinforce this orientation. This can only be achieved when we encourage more start-ups, well-defined office spaces, target smarter offerings, digital advancements and comprehensive hygiene,” adds Taing.

Developers say the commercial real estate segment has undergone a significant transformation over the past two years and continues to evolve due to uncertainties. “As the government focusing on Atmanirbhar Bharat and making the country a $5 trillion economy by 2025, we expect it to improve the ease of doing business and bring reforms to further develop the manufacturing sector . And to achieve this, India would need high quality office space and significant investment. A boost to start-ups and MSMEs will also support commercial real estate growth,” said Abhishek Pandey, Vice President of Customer Engagement and Distribution, Viridian RED.

The government should therefore consider facilitating tax incentives, adequate infrastructure, the creation of dedicated clusters to propel the growth of start-ups and the MSME sector. “These moves are also likely to drive growth in the commercial real estate segment. We also expect the government to address the long-standing demand for one-stop customs clearance for the real estate sector, as this will help streamline multiple approval processes,” he said.

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