Budget 2022: Realtors seek higher affordable housing, homebuyers’ tax benefits limit

Real estate developers are seeking an increase in the limit of home loan interest deduction for tax rebate to Rs 5 lakh from current ceiling of Rs 2 lakh, a review of definition of affordable housing, lower long-term capital gains tax for real estate and new provisioning for rental housing in the upcoming Union Budget for 2022-23.
Realty developers’ body CREDAI has written to the Finance Ministry to also suggest exemption in tax to investments in Real Estate Investment Trusts (REITs) starting with Rs 50,000 and to allow tax-neutral consolidation of businesses through merger or amalgamation to push rescue of stalled housing projects helping troubled homebuyers.

“We expect the upcoming budget to provide the much-needed impetus to infrastructural development, and housing by introducing various amendments, relaxations & extensions which will be helpful for realizing the Prime Minister’s dream of Housing for All and faster economic recovery,” said Harshvardhan Patodia, President, CREDAI. “We urge the Finance Ministry to increase the interest deduction for homebuyers for tax rebate under section 24(B) to boost the overall home buying sentiment especially in these difficult times with the onset of the third wave.”

Amendment to section 80C of the Income Tax Act, 1961 to increase the limit for repayment of housing loan principal or alternatively introducing another section for deduction with respect to repayment of housing loan principal is also among the key suggestions made by realty developers to the ministry.

“We are hopeful that the upcoming budget will bring realty under the infrastructure status which in turn will unlock multiple tax benefits to boost foreign and local investment and the overall demand in the sector…Amendments in the definition of affordable housing in terms of counting the ticket size of the apartment instead of area, new provisions for encouraging rental housing, single-window clearances, input tax GST credit for developers are some key reforms that need to be considered for expediting economic recovery,” said Deepak Goradia, President, MCHI.

Realtors have also sought an extension of the Credit Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana for Middle Income Groups until December 31, 2022. Timelines to avail the CLSS benefits for MIG housing also may be extended till the time allocated fund is not utilized.

For affordable housing, developers have suggested increasing the limit on value of the house to be raised to Rs 75 lakhs in non-metro cities and Rs 1.50 crore in metro cities from the current ceiling of Rs 45 lakh. Alternatively, they have recommended increasing the size of such apartments to 90 sq meters in metros and 120 sq meters in non-metros from 60 sq meter and 90 sq meters, respectively.

According to Patodia, there is a need to relook at the definition of affordable housing that factors-in current situation and steep increase in raw material prices and extend the eligibility of the projects from March 31, 2020 to March 31, 2023 for making a difference to the community and ensure last mile benefits for homebuyers.

Additionally, developers are expecting certain provisions with a slew of measures including deduction of loss under house property, reduction in income tax burden on rental housing and long-term capital gains on capital assets, relaxations in provisions for REITs for faster recovery in commercial real-estate.

Real estate developers are of the view that given the key role real estate development can play in job creation and economic recovery, their recommendations will be considered in this budget.