The longstanding pandemic of COVID-19 has impacted global economies, and the depths of distress have not spared Indian real estate. The hopes of the real estate sector for the upcoming Union Budget 2021 are perhaps strong.
Proposed Stress Fund for Realty Sector by NAREDCO
An approximate Rs 1,25,000 crore was urged by NAREDCO, through multiple HFC/NBFCs who announced that they are willing to set up such stress funds for ailing real estate industry. As per this will enable rapid evaluations and sanctions. Niranjan Hiranandani, NAREDCO's National President, stated that although the real estate Industry appreciated the Rs 25,000 Crore SWAMIH Fund initiative for assisting the realty sector, allowing additional stress funds would help to promote the last mile of funding for stressed and stalled projects.
Another proposal made by industry was to boost the loan-to-value (LTV) ratio up to 90% across-the-board for Rs 30 lakh or less affordable housing loans and extend the same facility to MIG and HIG. In accordance with Section 24 of IT Law 1961 on housing loans for Rs 2 lakhs, existing interest deductions on home loans should be withdrawn to encourage home purchasers to pay interest without ceilings.
Bringing a 10 percent long-term capital gain (equal to section 112 for equity) and reducing the holding period to a maximum of 12 months from current 24/36 months is to set as a Long-term Capital asset is need of an hour. The loss from household property should also be completely adjusted with other incomes. It should be allowed to proceed for the following years in case of unadjusted losses. NAREDCO is proposing an HRA Tax Exemption increase on rental housing, an increased rate of depreciation on rental projects such as commercial buildings and enabling rental losses to continue would make a significant change.
To encourage rental housing a 30 percent deduction from annual rental income should be raised to 50 percent (for maintenance). Not only would this boost the ROI, but it will also allow people to invest in residential properties for rental purposes. Likewise, affordable housing would benefit from an increase to six periods of completion thus allowing for concessional lending rates for affordable housing projects. The extension of the Credit Linked Subsidy Scheme (CLSS) for all segments would benefit home buyers.
For the direct benefit of the home buyers, the ban on subvention schemes must be reconsidered by realtors. The restriction on schemes enforced should be updated by RBI and the National Housing Bank (NHB). The ban is not in favour of homebuyers because many of them are unable to pay both EMIs for their home loans and home rentals.
Other proposals from the NAREDCO include the one-time restructuring of loans, the allowing of external trade borrowings (ECBs) to the real estate industry and reform of special economic zones, extending the notification deadline for IT / TEES SEZs, and removal of MAT with an expectations that this can go a great way to assure positive signs in the real estate sector.
By: Shailaja K