The Budget 2023 will be presented to the parliament on February 1, 2023, by the Union Finance Minister Nirmala Sitharaman. Industry leaders from diverse sectors have placed high expectancies on the Budget 2023 and anticipate some pivotal announcements from the Finance Minister. In this blog we’ll be looking at some of the expectations of the real estate industry when it comes to Income Tax Deduction, Home Loans, Section 80 C, Home Buyers and more.

Let’s find out what industry experts have to say.

1. Focused tax deduction on housing loan principal repayments (Section 80 C)

Currently, Section 80 C of the Income Tax Act does not offer a focused benefit on housing which is the highest and most essential spending item for most taxpayers throughout their careers. Investors too have a number of investment opportunities, so the lack of a unique tax benefit on the principal amount of loans ultimately discourages them from investing in real estate. Home loan applicants will benefit greatly from a separate annual deduction of INR 150,000 for principal payments, which will help to increase housing affordability.

2. Raising the section 24 home loan deduction cap

The current limit for the Section 24 house loan interest deduction is INR 2 lakh. To enhance affordability and housing sales, this should be raised to INR 5 lakh.

3. Easing of capital gains requirements to aid homebuyers and increase affordability

According to section 54 of the Income Tax Act, long-term capital gains from the sale of an existing property may be used to purchase or construct a new home. If the investment qualifies for the exemption through a property that is still under construction, the investment can only be claimed if the property is completed within three years of the sale of the previous residence.

Residential construction projects are getting bigger in terms of the number of units, height, and amenities, which causes completion dates to be longer than three years. Furthermore, even if the implementation of RERA has brought about a significant improvement, completion dates for ongoing projects frequently go over the allotted time. This makes it challenging for purchasers of homes still under construction to write off capital gains. Experts recommend that the current three-year completion deadline for houses that are under development be extended to five years in order to remedy this.

Let’s now move towards a few issues highlighted by experts and their recommendations to overcome these.

Issue #1 – Making affordable housing projects more financially viable.

What Experts Recommend:

The deadline for registering an affordable housing project to receive a tax break under section 80IBA has lapsed. The section 80IBA registration timeline must be reintroduced.

What Are Their Justification:

Section 80IBA provided a 100% tax exemption for affordable housing projects that were approved through March 31, 2022. This clause stipulated that, subject to certain restrictions, such as the approval date, developers could claim a 100% tax exemption on earnings.

As per industry experts, it is critical to resurrect this measure since it is undoubtedly the most physically meaningful measure for increasing the viability of affordable housing projects.

Issue #2 – Rental housing in the affordable sector requires a boost.

What Experts Recommend:

100% exemption for rental income up to INR 3 lakh for houses up to INR 50 lakh.

What Are Their Justification:

This would encourage people to invest in the inexpensive housing segment, which is suffering from a severe housing scarcity. Owners of such houses avoid renting them out due to the low rent yields. This tactic will clearly encourage such property owners to rent out their residences to the targeted demographic, supporting efforts to increase the supply of housing in this market.

The Budget Session of the Parliament will commence on 31st January, 2023.