CREDAI’s recommendations for Union Budget 2023-24 focus on sustaining growth by boosting demand
– Increasing tax exemption on interest for homebuyers from Rs 2 Lakhs to a minimum of Rs. 5 Lakhs
– Doing away with the price cap of INR 45 lakhs for affordable housing under Section 80IBA
– Incentivizing homeowners by exempting rental income up to Rs. 20 lakhs per year
National, 19th December 2022: As India’s presidency of G-20 further cements its position as a Global power and the pro-business policies introduced by the current Government under Hon’ble Prime Minister Shri Narendra Modi’s visionary leadership continue to fuel economic growth. CREDAI believes these can be further enhanced to chart the next steps for the country’s GDP growth. Hence, as part of the Government’s outreach to various industry associations to seek inputs for Union Budget 2023-24, CREDAI’s key recommendations include an increase in tax exemption on interest paid on home loans, exemption on rental incomes, relaxation in investments on long-term capital gains, uniformity & expansion in the definition of Affordable Housing, and exemption on investments in Real Estate through REITs.
With increasing retail inflation and continuous repo rate hikes, resulting in higher EMIs on all consumer loans, there is a compelling need to increase the existing limit of Rs 2 Lakh on exemption of interest paid on home loans to at least Rs 5 Lakh. This would not only give some extra disposable income in the hands of middle-income homeowners but would also attract prospective homebuyers to buy a home & thereby boost demand.
Additionally, the price cap of INR 45 Lakhs on units to qualify as affordable housing needs to be revised as there have been substantial changes in the prices of various construction raw materials, labour costs & overall construction costs. This has impacted the overall price of housing leading to ineligibility for tax exemptions under Section 80IBA. CREDAI urged the officials to expand the definition of Affordable Housing units only on carpet area without any price cap.
To boost the demand further, CREDAI requested the Government to incentivize homeowners by exempting 100% of the rental income up to Rs. 20 lakh per annum. This would encourage people with disposable incomes to invest in properties for renting purposes.
The recommendations also included the flexibility of allowing investments through Long Term Capital Gains in more than one residential property. Reduction in the tax rate on long-term capital gains on capital assets from 20% to 10% and reducing the holding period to 12 months were also recommended.
Commenting on the recommendations shared, Mr. Harsh Vardhan Patodia, President, CREDAI, said “Our recommendations are focused on sustaining the current growth in the sector, boosting demand and exemptions for homebuyers. The real Estate sector can add millions of livelihoods in a short time and significantly contribute to GDP. Continuous rate hikes may cause short-term turbulence in overall housing demand when buyers are optimistic about making decisions, adding to buyers’ overall acquisition cost. The sector has begun to gradually recover across key property markets, primarily driven by end-users; however, repeated rate hikes may have an impact on the interest-sensitive sector. The sector’s growth will directly fuel the growth of all ancillary industries thereby creating a cascading effect on job creation & economic development.”
With the Real Estate industry poised to reach $1 trillion in market size by 2030 while funding almost 13% of the country’s GDP growth by 2025, the real estate sector has seen unprecedented growth in the last 2 years across all parts & various categories. While schemes such as ‘Housing for All’ supplemented by the ‘Affordable Housing Policy’ & ‘Pradhan Mantri Awaas Yojana’ has fulfilled the dream of owning a house for many underprivileged families, CREDAI’s recommendations shall aid in further growth of the Real Estate Sector to boost demand.