Budget 2022 expectations: Six measures that can help home buyers

By Ramesh Nair
The threat of Covid-19 continues to cast a shadow on the promising prospects for the real estate sector. Hence, the extension and continuation of demand-side measures including tax sops and incentives to homebuyers will only strengthen the fundamentals of the real estate sector. Here are six home buyer-friendly measures that the finance minister should consider announcing in Budget 2022.
1.Continuation of Credit Linked Subsidy Scheme (CLSS) for EWS/LIG/MIG
The benefit of CLSS was available until March 31, 2021 for the MIG segment, while the EWS and LIG segments can avail it until March 31, 2022. A time extension of this benefit across all these income segments for an additional year will give affordable and mid-income homebuyers the financial elbow room to make a purchase. As a step-up, the government should evaluate the possibility to expand the coverage of beneficiaries by increasing area and ticket-size thresholds under MIG.
2. Extension of benefit u/s 80EEA to avail additional Rs 1.5 lakh interest deduction on home loans
This benefit, available to first-time homebuyers was extended until March 31, 2022 during Budget 2021. At a time, when interest rates are at historically lower levels and housing prices are stable, this extension will be timely. This will continue to incentivise prospective homebuyers in the affordable and mid-income segments.
3. Reduction in the differential between circle rate and transaction value
In 2020, the government introduced a time-bound measure to reduce the differential between circle rate and transaction value by 20% to calculate taxability. On one hand, it benefitted homebuyers, and on the other, it helped developers to clear their unsold inventory. A continuation of a similar stimulus will benefit the overall residential sector, at a time when it is recovering amidst the pandemic.
4. Separate provision allowing deduction of principal repayment
A dedicated tax provision allowing deduction of principal repayment (currently forming part of 80C deduction) will incentivise homebuyers through higher tax benefits. This will be a timely relief in the current scenario where several homebuyers are grappling with honoring financial commitments.
5. Removal of restriction on setting off a loss from house property
The Finance Bill, 2017 introduced provisions to restrict the set-off of loss from house property against other heads of income to Rs 2 lakh during the year. The removal of this threshold will enable the individual to claim the entire interest on his let-out property without any limit, resulting in a higher effective post-tax return on his property. This can spur investment sentiment in the housing market.
6. Waiver of GST on under-construction projects
Buyers continue to have a greater preference for completed projects as its results in lower tax outgo and the risks related to delay delivery is eliminated. A time-bound waiver of GST on under-construction projects will provide prospective homebuyers a wider palette of properties to choose from, keeping taxation at par with completed projects. At the same time, it will aid in reducing the mounting inventory in under-construction projects. Currently, the GST for under-construction affordable housing units is 1%, while for other projects it is 5%, without the input tax credit.
(The author is CEO, India and Managing Director, Market Development, Asia, Colliers.)
Recommended reads:
• State of the Indian Economy
• Union Budget: How India earns money
• Union Budget of India: How government allocates funds