Budget 2022 Expectations for Real Estate: Experts are giving suggestions to the real estate sector regarding the budget for the next financial year 2022-23, which can benefit from developers to home buyers.
Budget 2022 Expectations for Real Estate: The aftershocks of the Corona epidemic badly affected the real estate. However, in most of the segments, real estate has made a spectacular comeback and has regained its position to a large extent. Especially the housing and commercial office segments have reached their pre-Corona levels. In such a situation, the real estate sector has high hopes from the upcoming budget. If home buyers, investors and developers get tax relief and incentives, then this sector will be of great help.
The economy is recovering rapidly from the shocks of the Corona epidemic and a growth of 9.2 percent is expected in the current financial year 2021-22. Apart from this, high-frequency indicators are also giving positive signals about the market. The central bank RBI has kept rates at a low level and the government also gave timely incentives, which supported the real estate market and helped it recover from the corona epidemic. Now the real estate sector has many expectations attached to the budget for the next financial year 2022-23, which are given below.
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Industry status given to real estate sector
There has been a demand for industry status for the real estate sector for a long time and it has been partially fulfilled. At present only affordable housing has been given infrastructure status. This sector will be benefited by getting loans at low cost and easy access to loans through infrastructure status. This will also boost investment and employment.
Demand for tax benefits on contribution to ‘Net Zero’ target
If a developer is constructing commercial and residential buildings that help in achieving the net zero carbon target, then they can be given benefits such as a one-time exemption on tax liability on profits and other tax incentives. Net zero means that the net carbon emission is zero, that is, the total amount of carbon being emitted is absorbed. With regard to net zero carbon, developers can focus on natural light, green roof and renewable sources of energy, sewage treatment, rainwater harvesting, etc., if they get tax benefits from the budget.
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Demand for exemption in GST on under-construction projects
At a time when the residential sector is showing strength and is recovering from the adverse effects of the corona pandemic, GST relief on under-construction projects will help boost sales. At present, under-construction fordable housing units attract GST at the rate of 1 per cent along with input tax credit and 5 per cent on other projects.
ITC got approval in the calculation of GST
The government may reinstate Input Tax Credit (ITC) on raw materials. The government has reduced the burden of GST by cutting rates on residential housing projects, but due to non-availability of ITC to developers, there was less reduction in house prices. Apart from this, if the government reduces GST on raw materials like cement and steel, then there can be relief from the increase in their prices and home buyers will benefit.
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Expanded the scope of Credit Linked Subsidy Scheme (CLSS)
The CLSS facility is available for MIG (Middle Income Group) till March 31, 2021 and for EWG (Economically Week Group) and LIG (Low Income Group) this scheme will continue till March 31, 2022 next year. If the deadline of this scheme is extended by one more year, then home buyers will be helped. Apart from this, the government should review the area and ticket size so that more and more people can come under MIG.
Demand to create special fund for real estate projects
The liquidity crunch due to the pandemic has delayed the completion of some realty projects. In such a situation, there is a need to create a special investment fund so that such projects can be financially supported.
These are also the recommendations for Budget 2022
- First-time taxpayers get the benefit of an additional deduction of Rs 1.5 lakh on the interest earned on home loans under Section 80EEA. This benefit can be continued till 31 March 2023.
- Tax benefits available to developers on affordable housing projects under Section 80IBA may be extended till March 2023.
- Developers and home buyers have benefited from the reduction in the difference between the circle rate and the transaction value to 20 per cent. The government should consider extending this scheme for another financial year.
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- At present, the principal of the home loan is eligible for deduction under section 80C, which can be brought under a separate section in the budget so that taxpayers can get more tax benefits.
- Removal of bar on setting off income of Rs 2 lakh under other head on loss from house property.
- Like other listed securities, the holding period for long term capital gains under REITs should be reduced to one year.
- Reduction in GST rates on commercial properties made for lease. Currently, 18% GST is levied on rental income.
(Article: Vimal Nadar, Head and Senior Director, Research, Colliers India)
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