The real estate industry anticipates an increase in demand due to favorable schemes and tax incentives in the upcoming Union Budget 2023.
Another demand is some relief in the form of income tax exemption on loans. (File)
New Delhi: The real estate sector in India was hit hard by the outbreak of the COVID-19 pandemic in 2020, leading to a significant drop in housing sales across major cities. However, the sector has seen a resurgence in 2022, with housing sales increasing by nearly 50% compared to the previous year. As the Union Budget 2023-24 is set to be announced by Finance Minister Nirmala Sitharaman on February 1, the real estate sector is expecting further growth in demand through favorable schemes and tax breaks.
The Indian government has been working towards providing housing for all by 2022 under its flagship Pradhan Mantri Aawas Yojna – Urban (PMAY-U) program. In 2019, the GST Council also took steps to make houses more affordable by reducing the tax rate on affordable houses to 1% from 8%, and lowering the GST from 12% to 5% for other categories of houses.
Currently, affordable houses are defined as those in urban metropolitan areas with values up to ₹45 lakh and an area of 60 square meters or less. However, some stakeholders in the real estate sector believe that the ₹45 lakh band is too low given the rising prices of properties in metro cities. Anuj Puri, Chairman of Anarock Group, has called for the government to "seriously consider revising the price bandwidths for homes to qualify as affordable housing to align with the market dynamics of different cities."
Another demand in the real estate sector is for relief in the form of income tax exemptions on housing loans. At present, buyers can claim income tax deductions for stamp duty and registration fees paid for the purchase of a residential property, but this amount is included in the total exemption limit of ₹1.5 lakh under Section 80C of the Income Tax Act. This only applies to ready-to-move-in properties and not under-construction houses. Additionally, taxpayers can also claim deductions of up to ₹2 lakh per annum on the interest paid on home loans under Section 24(b) of the Income Tax Act. Experts believe that an increase in the exemption limit is needed and the real estate sector is hopeful of a positive outcome in the Union Budget 2023.
There is also a call for an expansion in the eligibility of income tax rebates under Section 80EE of the IT Act. Currently, only first-time buyers can avail of the additional tax benefit on home loan interest. Extending the benefit to other buyers could help improve the demand for houses and boost the real estate sector.
The rising cost of commodities such as cement, steel, and other construction materials has remained a major concern for the real estate sector. Industry insiders believe that even a marginal drop in GST rates on construction materials could help the real estate sector by reducing input costs and making housing units more affordable for buyers. In conclusion, the real estate sector in India is on a path of recovery and the upcoming Union Budget 2023-24 is expected to provide further impetus to the sector through favorable schemes and tax breaks.
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