Anshuman Magazine, CMD of CBRE South Asia writes how tax rebates to homebuyers could revive the housing market.
As the Union Budget 2016 draws closer, India’s real estate sector hopes for its key expectations to be addressed in the Budget announcements. Much hope rides on rebates for homebuyers in the form of relaxed individual tax slabs that might result in more disposable income and subsequently improve demand in the housing sector.
Direction is also sought from the Government on the way forward for related regulatory changes, including the pending Land Acquisition and Real Estate (Regulation and Development) Bills. We hope that the year 2016 will be one of implementation and direction for the nation and its economy.
Considering the current lull in the Indian housing market, it is hoped that the Government will take initiatives to encourage homebuyers to make a return. To incentivize property buyers, especially first time homebuyers, rebates and relaxations on taxable income would be steps in the right direction for inducing home purchase decisions. Individual taxpayers are hoping for an increase in personal income tax exemption limits along with higher deduction limits on home loan interests from the Budget.
With the relaxation made last year in the minimum Provident Fund amount to be deducted for salaried taxpayers, individuals employed in the private sector have also been enabled to save greater amounts from their salaries. A further increase of the deduction limit for the home loan interest component in the current personal taxation structure would go a long way in helping buyers cope with the prevailing high property prices in our leading cities.
Relaxing the rules related to home loan interest exemptions would also bring relief to buyers of delayed housing projects. Although the Central Bank has already reduced key interest rates to 6.75% (repo rate) through several rate cuts last year, these are yet to be passed on to homebuyers by banks. Directives are sought from the Government for the banking sector to implement these rate cuts on ground at the earliest.
Increasing the house rent deduction limit, especially for the self-employed and those without a HRA component in their pays, would also help individual tax payers to claim reasonable tax deduction. There are expectations of incentives and adjustments being announced in the Budget for reverse mortgage as well, which is a useful tool for senior citizens to unlock the value of their real estate assets. All these considerations could help make a positive tax impact on individual taxpayers, spurring sales activity in the housing sector in many cases.
Moreover, despite the property market attracting sluggish demand, and prices having largely remained stagnant across most residential neighborhoods, input prices in the real estate and construction sector continue to be high. In an effort to revitalize the market, tax rebates are also sought for construction material sectors, such as cement.
Streamlining of the land acquisition process is an important move, long awaited by the realty sector. The Land Acquisition Bill in question is still pending in Parliament, and further development in the housing market is directly dependent on the passage of this Bill. Greater clarity is also sought on the pending Real Estate (Regulation and Development) Bill. It is hoped that it will be balanced between end-user as well as developer interests and concerns.