Budget’s Welcome Boost for Real Estate
It is welcome that the Budget proposes several measures to rationalise tax and boost transparency in the policy-challenged real estate sector. Abroad, in the mature markets, real estate accounts for almost half the GDP growth; the like figure for real estate activity here is far smaller. Clearly, there is much potential for growth in the sector — of course, contingent on overall growth and dynamism in the economy as a whole. The Budget seeks to shift the indexation base year from 1981 to 2001 for the levy of capital gains tax on land and real estate, which was long overdue. An unrevised indexation base year is perverse incentive to hide and not fully disclose capital gains in housing and real estate. Additionally, infrastructure status for affordable housing and its broader categorisation are both moves in the right direction of reform. Further, removal of the tax on notional rental income for one year, from the date of issue of completion certificate, would allow real estate developers to liquidate inventory and avoid additional tax burden. There are still other notable housing-related measures in the Budget, such as the increased quantum of refinance for real estate, or the move to extend the period for external commercial borrowings for housing at reduced rates. Yet, there remains widespread opacity in real estate, and which needs to go. Reportedly, construction permits require several dozen clearances. We surely need to move to a system of online issuance of such permits, across states. The base-year indexation needs decadal change, for predictability and transparency. The way ahead is to frame concrete rules under the Real Estate Act, 2016, and also revamp regulatory oversight across jurisdictions. We do need to systematically shore up resource allocation for housing and real estate nationally.