Real estate sector is one of the major contributors to the GDP of India, but it has suffered badly in the financial year 2016-17 and it is desperately waiting for the attention of the union government.
The Real estate sector was hit badly by the introduction of the Real Estate Regulatory Act (RERA) in the first quarter of the financial year. When it was struggling to recover, demonetisation caused another major damage to it in the third quarter. The industry is finding it hard to overcome the downswing period with both buyers and constructors facing several problems including cash crunch.
The union government needs to take some serious decisions in its budget 2017-18 to boost the confidence of the real estate sector. It is expected to work on encouraging buyers and also controlling falling prices. Here are five expectations of the real estate sector that the union budget 2017-18 must address.
1 Relaxation in income tax rate:
The current limit of tax deduction limit is Rs 2 lakh, which is insignificant, when looked at in the context of prices of houses in metropolitan cities. The price of a house starts from Rs 1 crore in cities like Mumbai and buyers have to pay huge amount of money in the name of repayment of loan every year. Hence, the tax exemption limit should be increased at least by Rs 1 lakh. The government should also introduce tax concessions on house insurance premiums, which will encourage buyers to insure their homes.
2 Raise HRA deduction limit for self-employed persons:
Salaried persons get house rent allowance (HRA) as a component of their salary, and they can claim a deduction for the same. But self-employed persons and people who draw lump sum can only claim a maximum deduction of Rs 2,000 a month under Section 80GG. This issue should be addressed in the union budget 2017.
3 Policies to standardise construction materials:
The increase in the prices of cement and other construction materials is impacting the cost of housing. In Union Budget 2017, the government should announce policies on standardisation of major construction material. It should also work on the tax clarity on REITs and make it viable, which will ease the investment options.
4 Single window clearance:
The real estate sector needs various government approvals to its projects, but the bureaucratic process is delaying delivery of homes. There has been a long standing demand for a single window clearance to stop bureaucratic delays. If the government brings this system, it would boost the real estate sector in a big way.
5 Industry status for real estate sector:
The real estate sector, which contributes to over 15% of the GDP of India, is granted with infrastructure status. But giving it an industry status would boost this sector and help it deliver homes faster. This status would avoid the delay in the delivery caused by high interest rates, unavailability of funds and stringent evaluation process.
These above mentioned reforms will give momentum to the real estate sector, which has been struggling since July 2016, and with the reforms, this sector will make remarkable progress in 2017.