MUMBAI: With the Union Budget for 2023-24 slated to be tabled on February 1, the National Real Estate Development Council (NAREDCO), the apex body real estate industry, has put forward its pre-Budget recommendations to the government. In its memorandum to the government, NAREDCO has suggested the real estate industry could become more productive and thrive, if certain regulations and taxation blocks are eliminated, particularly those concerning the deduction of interest for customers looking for a home loan, besides the tax load on developers working on affordable and rental housing.
It has also recommended amending or removing certain sections of the Income Tax Act, and incentivising business entities and individual investors looking to invest in the capital-intensive sector. It, however, did not pinpoint those sections under the relevant Act. Further, the apex real estate body has urged the government to remove Section 23(5) of the Income Tax Act, which deals with notional rental income from the housing.
"Developers should be exempted from the burden of tax on notional rental income under Section 23(5), said Rajan Bandelkar, president of NAREDCO, adding that the idea of notional rent levied opposes the idea of promotion of rental housing in India. The year 2022 ended on a firm note, with a rise in sales of residential properties in major metros. Commercial leasing, too, saw a revival after the Covid lull.
It has also recommended that the government consider an increase in the limit of interest deduction under Section 24(b) of the I-T Act "To keep the momentum going, measures need to be taken to bolster confidence in the industry. This includes expanding the deduction available for home loans under Section 24 (b) from Rs two lakhs to Rs five lakhs. Such an incentive will stimulate demand and lessen the housing deficiency in the nation," Bandelkar said.
Indian real estate sector has come out of the troubled waters facing strong headwinds caused by the Covid-19 pandemic and has done relatively well in 2022 with the growth outlook for this year projected to be robust. Besides the once-in-a-century pandemic, the realty sector also smartly manoeuvred the rising input costs and the relatively elevated cost of borrowing. To keep the momentum intact, Niranjan Hiranandani, vice chairman of NAREDCO suggested the government grant infrastructure status to the real estate industry.
"Granting infrastructure status to avail long term cheap funding as this interest rate sensitive sector is grappling with inflation led high cost of credit borrowings. This will allow developers to build and deliver housing projects at an affordable cost," Hiranandani added. Budget 2023-24:
The union government is in the process of finalising the Budget document to be presented on February 1. Budget 2023 is likely to be the last full budget of the Modi government in its second term with the next Lok Sabha elections due in April-May of 2024.
The formal exercise to prepare the annual Budget for the next financial year commenced on October 10.