People queue up standing a metre apart to buy groceries and essentials in a housing society. (Image credit: Shome Basu)
The year 2020 saw the worst pandemic known to mankind. People across the world experienced mental and financial stress, more so those from the middle and lower income categories. Homebuyers confronted a breakdown of financial plans due to job losses and business failures, and the resultant loss in earnings. Naturally, expectations from Budget 2021-22 are high.
Before I put forth my expectation as a homebuyer from Budget 2021-22, it is worth recapitulating the sops for the real estate sector announced since Budget 2017. Important among them are - Infrastructure status to affordable housing, reduction in the period for Capital Gains Tax from 2 to 3 year’s (Budget 2017); enhanced thresholds for variation from circle rates for purposes of tax (Budget 2018).
Other initiatives included removal of notional rent for individuals owning up to two self-occupied properties, rollover of capital gains up to Rs 2 crore for buying two houses compared with one earlier (Interim Budget 2019); Interest deduction up to Rs 3.5 lakh for affordable housing (priced at Rs 45 lakh) as against Rs 2 lakh earlier for housing loans taken in FY 2019-20 (Budget 2019).
Despite the thrust year after year, the real estate sector has failed to perform. A recent report stated that during Q3 of FY 2020-21, housing sales declined 30% while new project launches declined by 44% year-on-year. This is all the more alarming as last year too was not a good year for residential real estate, and the current decline is measured on that low base. Needless to say that constant derailing and off-track implementation of the Real Estate (Regulation and Development) Act, 2016 (RERA) has failed in restoring the trust of homebuyers.
However, the Budget is an important policy instrument through which governments help revive an ailing sector, and if they incorporate the aspirations of home buyers and also ensure that the benefits do not remain merely on paper, it will go a long way in giving a fillip to the real estate sector.
Here are a few suggestions for Union Budget 2021-22:
(1) Section 24(b) of the Income Tax Act, 1961 should be amended to provide for deduction of interest from Income from House property even after possession of the house is received from a builder after more than 5 years i.e. to remove the limitation of 5 years for claiming full deduction of Rs 2 lakh under this section (Also, the deduction should be allowed from the year from which the loan is availed and not from the year in which possession is taken).
(2) Deduction of Rs 1.50 lakh for repayment of principal on home loan should be provided under separate section and should not be clubbed under section 80C as the qualifying amount of Rs 1.50 lakh is already exhausted in most cases (Also, the deduction should be allowed from the year in which loan is availed and not from the year in which possession is taken).
(3) As a special relief for the homebuyers due to the devastation caused by the pandemic those homebuyers who lost jobs or had to work with pay cuts, a deduction for EMI/Rent whichever is higher paid by them should be allowed as a deduction from his Gross Total Income under a separate section for the entire tenure.
(4) For projects which are delayed by more than three years, homebuyers of such projects should be reimbursed by the developers an amount equal to EMI/Rent whichever is higher paid during the previous year. Such expenses incurred by the developers should not be allowed as a deduction from their business income. This will act as a big deterrence and compel developers to complete projects on time and also help in restoring the faith of the homebuyers.
(5) Every homebuyer who takes possession of his new house would like to furnish it. Any deduction for expenses incurred on furniture’s, fixtures and fittings of his new house would encourage him to spend to avail deduction and thus will create additional demand. It will anyway bring more revenue to the government in the form of GST.
(6) The government should come out with a white paper on SWAMIH (Special Window for Affordable and Mid-Income Housing), to disclose the number of units completed and possession handed over projects wise utilising such funds, total loans disbursed from such fund project wise, total loan repaid by developers, number of units for which work is in progress, and name of developers defaulted in repayment of a loan. Also, an extra fund should be provided in the corpus if needed to complete rest of the delayed projects pan India irrespective of the fact whether the project is RERA registered or not.
It will not only be in the interest of homebuyers but also in the interest of the real estate sector that our suggestions as aforementioned are considered with all due seriousness. This is the sure shot prescription to take the sector to its past glories.