India’s real estate sector has been experiencing some considerable crisis for the last few years. Demonetization and then GST had wielded an appalling effect on this sector. Some general yet crucial challenges such as exorbitant input and liquidity costs have further restricted the growth of real estate business to its full swing.

This financial year of 2019, the real construction businessmen are looking forward to substantial governmental reforms that can inject new vigor to this business. It is yet to surface what types of promissory reforms are stored in budget, 2019. Prior to that let us understand the nature of expectations that this industry has from the government.

GST for Affordable Accommodations

The present government has envisioned the target of providing ten million houses by 2022. More than ninety percent of this ten million houses will be made for low-income people and economically destitute.

However, the present 12% GST bracket along with one-third land abatement have exercised significant ascending pressure over an overall price of the accommodations. It is suggested that GST rate should be lowered pertaining to affordable houses to 6% and increasing land abatement to fifty percent.

Demand for Industrial Status

Over the years, the real estate has been contributing considerably to the country’s GDP. It has provided employment opportunities to millions of people. Despite playing such a crucial role in economic development, this sector is yet to get its due from the government.

Therefore, the real estate businessmen have unanimously agreed on demanding the industrial status. It will facilitate fundraising at reasonable rates and further decrease capital costs. If this demanded is granted in Budget, 2019, it is going to act as a positive stimulant for this sector’s business growth.

Increasing Land Abatement to Fifty Percent

The emergence of a singular tax system has put in extra price pressure on the real estate segment. It is currently placed within 18% bracket of GST taxation with one-third land abatement which is stretching effective rate tax to 12%.

On the downside, land share exceeds fifty percent of project estimate of costs in the leading metros. In order to provide relief to the real estate sector, it is expected of the government to elevate land abatement to fifty percent. It will reduce the effective rate of tax to 9%.

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Real Estate Investment Trust (REIT)

Although the REIT has been approved for quite some time, its effective utilization has still not been made by the relevant regulatory agencies. Real Estate Investment Trusts are capable of escalating supply of real estate of commercial nature. It plays a catalyst for forging of an employment environment.

However, the present long-term capital gain for the REIT unit-holders is three years thereby playing a detrimental role in real estate sector growth. The businessmen are hoping for alleviation to one year from the current three years. It can certainly trigger the interests of investors for future investments.

Housing building resources in 5% GST bracket

Real estate businessmen and workers are looking to reducing tax slab of construction materials. If this demand gets approved in Budget, 2019, it can prove to be a beneficial reformation in this sector. Furthermore, it is going to reduce the burden on small scaled traders. The benefits can be experienced by consumers as well since GST reduction will encourage them to prefer quality yet affordable housing.

Reformation in Sec 80 of Income Tax Act

The present provision of section 80 fails to emphasize the housing due to several competitive investment substitutes. In order to boost the accommodation purchasing decision, it can be recommended that a differential annual subtraction of Rupees One Lakh Fifty thousand can be carved out for principal repayment.

In case of distant years of a home loan time frame, the buyers are still required to pay an income component in principal form. It makes him ineligible for taxation benefit due to the unimportant interest constituent for that period. For addressing this confusion, another Rupees One lakh Fifty thousand deductions for the principal repayments can augment his accommodation purchasing cause for an overall loan period till twenty years.

Real estate sector is awaiting reformations that can pull it out of current crisis. It is yet to find out if Budget 2019 manages to stand up to these expectations.