Anticipating Changes In Budget 2023 for Real Estate Market
The Indian real estate market has high expectations for Budget 2023 as it emerges from the shadow of a global epidemic. Although the demand for real estate in India has grown in recent months, the real estate & construction industries are hoping for some particular relaxations. Despite the fact that the Coronavirus pandemic significantly reduced site visits and home demand nationwide, the months that followed inspired confidence with a resurgence in housing demand. Over 15% YoY rise was seen in India’s top eight cities’ demand for residential housing. On similar lines, a big rebound is anticipated in 2023.
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Major Expectations from Budget 2023 for the Real Estate Sector
The real estate industry is expecting the government to offer certain steps so that the road to recovery can be smooth at a time when it is dealing with post-Corona issues including growing input costs and razor-thin margins. The following are some of the major requirements of the real estate sector:
Home Loan Rate Variations
The demand for housing is directly impacted by home loan interest rates. Low interest rates on mortgages encourage home buyers to purchase real estate. Following the Corona virus, business confidence was poor, and consumers were reluctant to purchase real estate. However, nationalized banks and Non-Banking Finance Companies (NBFCs) attempted to reduce interest rates once the epidemic abated, although the drop was not substantial.
The Union government can include enabling measures in the budget suggestions, such as reduced down payment requirements, special incentives for small home loans, and lower rates of interest for the economically underprivileged group (citizens not eligible for PMAY), etc. Additionally, the real estate sector suggests that the principal deduction on home loans be enhanced in the budget 2023 recommendations to at least Rs 4 Lakh (currently 1.5 Lakh) every month.
The Income Tax Act of 1961’s Section 24 Increase Deduction Limit
The demand for homes can be raised by offering incentives to homebuyers who take out mortgage loans. The Government of India permits a deduction of Rs 2 lakh on the repayment of housing loan interest in accordance with Section 24 of the Income Tax (IT) Act of India. This deduction should be increased to at least Rs 5 Lakh, according to the real estate industry. The affordability of homes will improve with an increase in the deductions limit under Section 24 of the IT Act. Which would ultimately increase housing sales.
The real estate industry anticipates that increased tax breaks will facilitate home purchases.
Modifications to the Capital Gains Tax System
The sale of a home can be used to fund the purchase of a brand-new or under-construction home. As specified in Section 54 of the Income Tax Act of India. This allows for the claim of long-term capital gains tax exemption. However, in the case of a property that is still being built, the exemption can only be used if the project is finished within three years of the sale date.
The 3-year cap needs to be lowered in the Budget 2023 due to issues. Including construction activity delays, pollution-related construction bans, the Corona virus, and major townships having their own deadlines. Since Section 54 of the Income Tax Act allows for easy LTCG exemption claims, this enables the homebuyers.
Reintroduce the Tax Holiday for Projects Creating Affordable Housing
The Union government has recently given special attention to the expansion of India’s market for inexpensive homes. Including offering tax breaks. The tax break for affordable housing projects, however, was only valid through March 31, 2022. Up to March 31, 2022, the government offered affordable housing developments a full tax break under Section 80IBA. Developers working on affordable housing projects were entitled to claim a 100 percent tax exemption on earnings thanks to Section 80IBA. This exemption was contingent upon a number of requirements and conditions, including meeting project deadlines.
The cost of affordable homes is rising overall as a result of the tax break, which is currently over. Budget 2023’s return of Section 80IBA will give affordable housing initiatives a boost. Additionally, it will support the government’s goal of “Housing for All.”
Justification of the GST Regime
Following the global Corona virus epidemic, input costs have increased and profit margins have decreased. Additionally, high GST rates on building supplies drive up the price of homes and put a dent in prospective homeowners’ wallets. The current Goods & Services Tax (GST) rates for cement and steel are 18% and 28%, respectively. Because the developers are unable to claim Input Tax Credit (ITC) on the GST paid. The cost problems are made worse. In Budget 2023, the government can streamline the GST system and ITC to ease the financial strain and lower housing costs overall.
Conclusion: Real Estate Expectations from Budget 2023
In conclusion, the Finance Minister’s plans for the Budget 2023 have high hopes for the Indian real estate market. The real estate sector would have a robust recovery if major requests, including the GST’s simplification, revisions to the tax slabs. And support for the affordable housing sector, are included in the budget for 2023.
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