The real estate sector, which has experienced record highs in terms of sales and launches in the previous year, wants the Centre to recognize it as an industry and provide tax advantages to assist low-cost houses, according to many senior executives. According to Pavitra Shankar, managing director of Brigade Enterprises, the industrial status has been "one of the long-standing demands" in the sector. "This would provide easier access to institutional financing, streamline regulatory processes, and enhance investor confidence," according to her.
Shrinivas Rao, Chief Executive Officer (APAC) at Vestian, stated that the sector's industrial designation will facilitate the availability of finance and promote international involvement. G Hari Babu, Chairman of NAREDCO, stated that small and medium-sized builders are presently "fighting" for space and can only borrow from private lenders at exorbitant interest rates.
"By awarding industrial status to the real estate sector, the government will save these small and medium developers. With the industry classification, these small builders will be classified as MSMEs and would be able to obtain loans at cheaper interest rates," he stated. The industry also wants the Centre to implement measures, including as tax rebates, to increase demand for affordable homes, which is typically priced below Rs 50 lakh.
"The government should increase the deduction limit for interest payments on home loans from the current Rs 2 lakh per year to Rs 5 lakh, which will boost housing demand," said Ramani Sastri, chairman and managing director of Sterling Developers Pvt. Ltd.
Anshuman Magazine, Chairman and CEO (India, South-East Asia, Middle East & Africa) at CBRE, stated that the Centre formerly provided a 100% tax exemption for income and gains arising from the business of creating and implementing affordable housing projects. "However, the tax holiday expired in 2022," he informed me. "A revival of the scheme would benefit developers of affordable housing projects, as such projects typically operate on thin margins."
This comes at a time when affordable housing is battling to maintain its market share in India while luxury housing becomes more popular. Some CEOs also stated that the notion of affordable housing needed to be revised. According to the Ministry of Housing and Urban Poverty Alleviation, affordable housing is determined by property size, price, and buyer income.
Affordable housing is defined as a home or flat with a carpet area of up to 90 square meters in non-metropolitan cities and towns and 60 square meters in large cities, with a combined value of up to Rs 45 lakh. The Reserve Bank of India, on the other hand, defines it in terms of bank loans issued to consumers to build houses or buy flats. According to Forbes, "The government should consider increasing the size criteria for metro cities to 90 sq. and establishing three to four brackets of unit sizes and prices to define the eligibility criteria depending on city/state dynamics, as capital values in larger metro cities (Mumbai, Delhi-NCR) can be significantly higher vis a vis other cities."
In addition, housing developments, with the exception of affordable housing, are subject to a 5% Goods and Services Tax without the input tax credit (ITC). The GST for affordable housing is 1% sans the ITC. However, the GST rate on major building materials such as marble, tiles, glass, prefabricated structural components, and so on ranges from 12 to 28 percent. The industry argued that ITC should be reintroduced. "The government should also consider reintroduction of input tax credit, to enable the smooth transfer of benefits by the developer to the end customer," Pavitra stated.
