With commercial real estate growing at a rapid pace in India, the future for this industry looks promising. According to a recent report by Colliers, gross absorption of commercial spaces is expected to touch 54.3 million square feet in India’s top s…

The budget providing for a 10% income tax exemption on fresh/ new investments for under-construction properties until the occupation certificates are obtained would be a substantial measure in generating demand and the growth of the industry, and will also significantly benefit the government through increased volume of GST collections.

Income tax relief from the changeability of notional rent on fresh/new purchase of under-constructed properties, even if the property remains unrented, is another measure that once implemented, will have a positive impact on the sector. Not only residential but commercial properties should also be given similar tax benefits. Moreover, to boost the consumer sentiments, the government should consider a higher interest exemption limit for the financial year 2020-21 and additionally for the next 2-3 years. These steps would not only ensure a sizeable increase in transactions but also be beneficial in terms of the consequent GST collection and will increase the demand in allied industries.

Further, a 5-year tax rebate from the date of the handover on the leasing income from all new commercial properties upcoming in the next two years, with a condition that the project is timely completed and put for leasing, will also result in boosting the sector. Similarly, tax rebates on the income from residential property for 5 years from the date of possession where new projects are started and completed within the time-bound periods will also have a positive impact. While these measures would ensure the timely completion of projects, they would also help in boosting the demand as developers would be able to pass on these benefits to the consumers.

Source:  Budget 2020: Real estate industry pushes for the one-time restructuring of loans

The Budget wish-list of the real estate sector, particularly from the distressed residential segment, runs long. They would like more ease of doing business, a more flexible definition of affordable housing, and home loans at reduced interest rates. Industry bodies such as CREDAI and the National Real Estate Development Council (NAREDCO) also think a one-time restructuring of loans would help. “Liquidity shortage continues to cause distress in real estate. Hence, a one-time restructuring scheme with a moratorium on principal and interest of two years is immediately needed,” CREDAI stated.

In 2019, RBI had decided to permit a one-time restructuring of existing loans that were in default, without an asset classification downgrade. NAREDCO pointed out that the benefit of the circular is not available to the real estate sector. “As a result, the restructuring or rollover of the loans triggers the provisions related to NPA. Due to the downturn in the market and also failures of several big NBFCs, developers are facing acute liquidity shortage. We recommend that the banks and financial Institutions be given discretion to one-time restructuring and/or rollover of their existing loans on the lines of loans to other sectors,” the body suggested. NAREDCO also wants interest rates on home loans to be reduced to 7 % an annum – that could revive some of the demand and help the industry reduce its inventory of unsold apartments.

FULL COVERAGE: Union Budget 2020

The real estate sector does contribute over 8% to the Indian economy – and has justifiable expectations from Union Budget 2020-21:

• Hike the INR 2 lakh tax rebate on housing loan interest rates under Section 24 of the Income Tax Act – This could kick-start healthier demand for housing, especially in the affordable and mid-segment categories.
• Personal tax relief, either by a cut in tax rates or favorably readjusted tax slabs – The last increase in the deduction limit under Section 80C (to INR 1.5 lakh a year) was in 2014 and an upward revision is long overdue.
• Include ITC benefit in GST for under-construction homes – While the GST rate on under-construction properties was reduced to 5% in 2019, the previous ITC benefit was shelved. Already cash-starved developers cannot avail tax benefits for construction raw materials and the increased costs are passed on to buyers.