Real estate sector is one of the hardest-hit sector by the prolonged lockdown imposed due to the Covid-19 pandemic. Real estate being the second-highest generator of employment and contributing more than 8 per cent to the economy, its revival is one of the key issues that need to be addressed under this year’s budget of 2021-22.
The real estate industry suffered immensely due to the lockdown leading to no construction activities, unavailability of labour and dip in demand and sale of commercial as well as residential properties. Further, to add to the sector’s woes, the extended lockdown led to indefinite migration of labour to their villages, less disposable income with buyers due to increased job losses and expenditure cuts by corporates.
In 2020, we saw the Centre taking some proactive measures to help realty sector such as a six-month moratorium on equated monthly instalments, restructuring of loans of real estate companies, setting up of Special Window for Affordable and Mid-Income Housing (SWAMIH) fund – rescue capital for affordable and mid-income housing projects – along with capital infusion to the National Housing Board. The Reserve Bank of India also announced a massive repo rate cut of 140 basis points over the course of time, leading to lowest home loan interest rates in over 15 years.
However, the real estate sector is still in dire need of an intervention of the Government to overcome the slowdown it has been facing since long. The expectations from 2021-22 budget are high and the industry is awaiting big announcements that not only revive the ailing sector but also alter the future of the real estate sector.
Certain measures have been taken by the Government to bring a boost to the real estate industry so far. Here are certain key recommendations made by the industry to bring reforms to the real estate sector, which are expected to be addressed under the Union budget of 2021-22:
Similarly, the GST applicable for commercial properties that are not sold but developed for leasing is at 18% on the rental income, which is an additional burden. This needs to be considered to be lowered or abolished under this year’s budget.
Also, it is expected that there will be cut in GST for under-construction properties, which may help bringing down the cost of construction thus reducing the property prices and raise the demand for the same. Currently, GST rate over the under-construction properties is 5% minus the ITC benefit for premium homes [>Rs 45,00,000/- ] and 1% for affordable homes [<Rs 45,00,000]. Even a limited period waiver on GST will be a supportive move for developers to lessen their burden and in tandem, make prices of the properties economical.
This article was originally published in The Indian Express on 29 January 2021 Written by: Mrinal Kumar, Partner. Click here for original article
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