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Real Estate, Construction & Co-working Space expectations from Budget 2022: As Union Finance Minister Nirmala Sitharaman is all set to present her third Union budget on February 1, 2022.
Here’s what the Real Estate, Construction and Co-working space providers expects from Finance Minister Nirmala Sitharaman:
Dr. Boodati Lakshmi Narayana, Founder, Sahiti Group:
Personal tax relief, whether in the form of lower rates or altered tax slabs, is the need of the hour, given the previous rise in the Section 80C deduction limit (to Rs 1.5 lakh per year) occurred in 2014. Furthermore, the amount of investible surplus in people’s hands has been decreasing.
For an uptick in demand, the government should encourage home buyers by increasing the tax rebate on home loan interest to Rs 5 lakh, up from Rs 2 lakh currently. In this regard, income tax slab revisions will provide a financial cushion to the middle class in the purchase of a home. For long-term real estate expansion, a demand-pull must be developed in this direction.
Akshita Gupta, CEO, ABL Workspaces:
The coworking segment has grown exponentially over the years and has had a major impact on the performance and utilisation of commercial real estate. I feel now is the time when we should keep this very aspect and ensure progressive policy reforms to boost the market’s growth. I would like to put forth a humble request to the Finance Ministry to recognize the coworking space under schemes such as REIT, provide tax benefits and consider reducing the TDS deduction rates to upscale the segment. It would be great if the government can consider bringing coworking spaces into the 2% TDS bracket from the present 10% slab.
This will not only boost the market’s growth but will further allow the coworking spaces to seamlessly manage the cash flows since it is a service-based segment. I strongly feel that these reforms, if introduced, will play a major role in driving the growth of the real estate sector in the times to come.
Talking from start-ups POV, it is usually entrepreneurs from the early and mid-start-ups that prefer coworking spaces. However, costs like registration charges and stamp duty at registrar offices are borne by the coworking offices and if the government can reduce these charges, then it would directly benefit the end-users as they will have to spend less for the services. I am also of the view that if the requisite financial assistance can be provided to the start-ups, then it will indirectly help in driving the growth of the coworking spaces as well.
Gururaj Bhat, Chief Finance Officer, Karle Infra Pvt. Ltd:
Off-late, the developers are witnessing robust sales in the residential segment as many people are eligible for increased quantum of loan due to drastic reduction in the interest cost. Earlier the developers used to take GST input credit on the construction cost paid and used to adjust against GST collected from the ultimate customers. Subsequently the GST payment on residential purchase was slashed by Govt. from 12% to 5% and the provision to set off GST paid by the developers on construction cost against GST collected from the customers was taken off.
In the present scenario, the developers are compelled to add the GST paid on construction cost to the total cost of sale. During the current budget, if the Govt allows the builders to set off the GST at least to the extent of collection against the payment made by them on construction cost, customers would be benefited and the increased sales in the sector can be witnessed wherein the entire inventory/project will be sold.
With regards to SEZ office space developments, as per the present provisions, SEZ developers (IT/ITES) have to lease out the developed space only to 100% export oriented business units.
Whereas due to the continued pandemic situation, lot of IT and IT enabled services have started consolidating the office space to cut down the cost and many of the IT companies continued to allow its employees to work from home(WFH) options due to which lot of SEZ office spaces are being vacated.
Since the sun set clause of Income tax exemptions were not extended, no new companies are looking for SEZ office space for their requirements. In such a situation, if the Govt. extends its helping hand by allowing the SEZ developers to have the flexibility to lease out the SEZ office space to Non-SEZ IT companies, the vacant space can be filled which will facilitate the developers to repay the borrowed loan without any default.
Aditya Mehta, CEO & Co-Founder, Akasa Co-working:
Whenever faced with a problem, humanity always tends to bounce back with vigor and innovation. This is what 2021 showed us with a steep rise in demand for co-working spaces which is the perfect solution for mitigating the workspace costs. Moving into 2022, it is expected that the government will foster newborn start-ups entering the co-working space. With co-working on the cards, every possible tax exemption would go a long way for this industry.
Varun Mohan, CEO, Definite:
Numerous aspects have contributed to the development of the Indian real estate sector. The Government of India’s Digital India scheme accelerated technological growth, PropTech is booming in the Indian real estate industry and the Real Estate (Regulation and Development) Act (RERA), 2016 helped in the promotion of the sector. But the pandemic has hit all the business sectors across the country including the real estate sector with the third wave ongoing recovery may once again take a setback. Investors are expecting relief from the government’s end.
The expectations are reductions in GST and an increase in home loan interest, the deduction for a tax rebate, and a rise in FDI inflow. The government must focus on the real estate sector; it is globally the most recognized sector and generates the second-highest employment in the country. Retail, hospitality, and commercial real estate are growing significantly, delivering the much-needed infrastructure for India’s growing need for relaxation in taxation would be helpful in the development of the sector, and reduction in GST rates can give a lot of relief to the fraternity. Also, steps must be taken to make the industry more technologically smart. The ongoing pandemic has made us all realize how important technological aspects are for any business to run successfully.