As the Union Budget for the upcoming financial year 2020-21 is just days away, industry experts across the Indian markets are on the edge of their seats, waiting to see what the Finance Minister has in store for them. While the economy's sluggish performance this year has given all the experts plenty to worry about, they remain hopeful of performance boosters, from this budget.

The housing sector, that is yet to shake off the slumber it has fallen into, is vocal about their reservations, prenominations and expectations from the Finance Minister. While the centre has made allowances for the sector, in the form of distress fund - the Alternative Investment Fund, however, its implementation is still awaited. Real Estate honchos and experts have unanimously stated that if the centre doesn't step in with friendlier policies and propositions, the future of the sector will continue to look abysmal.

Let's take a look at the sector's wishlist for Budget 2020.

1. EASE IN TAXATION

One of the biggest cause of concerns for real estate developers and stakeholders is the alarmingly high rate of taxation that is levied on the sector and homebuyers. The sector is the second biggest employer in the nation and is stated to contribute only up to 10% to the GDP - a high disproportionate ratio, in an economic lens. Severe taxation is credited for the cap on the sector's contribution. Experts state that if personal taxation norms are relaxed, more people are likely to come forward and buy commercial or residential properties.

The sector wants the ₹2 Lac tax rebate on housing loans (announced in the Union Budget 2019) to be pushed up to almost ₹5 to 7.5 Lacs, for all buyers who buy a house in the financial year of 2020-21. This could be the push the sector needs in boosting sales in affordable and midsegment categories.

Income tax relief for even those homebuyers stuck paying EMIs for an incomplete project would be a bold new incentive, as many potential buyers shy away from such a long term financial commitment, out of fear of being wrung dry.

2. DOING AWAY WITH LTCG TAXES

Reports claim that the centre is considering a proposal to eliminate Long Term Capital Gains (LTCG) taxes that are levied on the selling of property. This possible move will be enthusiastically welcomed by the housing sector and homebuyers alike, given its lenient nature. This is a sure shot measure to drum up real estate sales, as investors will no longer be afraid of stringent tax measures.

Currently, almost 30% capital gain has to be paid, if the property holder doesn't reinvest the back in real estate, within a window of 3 years.

When the measure was first announced, it was met with a lot of backlash. Hopefully, the cabinet's undoing that move will have the effect it aims to have.

3. INCREASED LIQUIDITY OF FUNDS

The ongoing liquidity crunch is taking a massive toll on the real estate sector. This cash crunch epidemic, made worse by the NBFC crisis is proving to be extremely damaging - affecting buyers' sentiments to such an extent that most feel discouraged from buying a home. Developers are unable to complete under-construction projects, delaying possession and leaving homebuyers in a lurch. While the distress fund signed off by the centre in the form of the Alternative Investment Fund is a huge leg up for incomplete projects, experts reiterate on the further and continuous efforts of recapitalizing the sector.

The impending implementation of the AIF too has been a cause of concern for insiders of the sector.

4. INCREASE AND DEFINE GST BENEFITS

Experts have stated that GST benefits are instrumental in boosting buyer sentiment in the real estate market. This can be done in several ways. Developers want a reassessment of how GST affects construction costs (raw materials etc). No tax benefit is extended to already cash strapped developers on buying these materials and the brunt of these costs are passed onto the buyers.

Providing Input Tax Credit benefits is a great way to incentivize reduced property prices and having under construction homes at such attractive prices is likely to drive up property sales.

Experts also recommend a one-time exemption from the applicability of the GST on first time home buyers, so they can keep the cash cycle up and running. This would again, help in drumming up sales from first time home buyers.

5. INCENTIVISE PRIVATE SECTOR INVESTMENTS IN AFFORDABLE HOUSING

The average first-time homebuyer is unlikely to buy a house that is bigger than a 2 or 1 BHK flat unit. The affordable housing sector is probably the biggest category for the Indian demographic, especially for those who belong to the lower economic strata, or those looking for starter apartments. These homes are also a popular investment choice for multiple homeowners of business owners. Championed by the Prime Minister's Housing for All by 2022 promise, this sector has seen unchartered growth, ever since. However, despite this, the profit margin reported for this sector is inexplicably low. Developers also report difficulty in getting funding from private banks and leading NBFCs at a reasonable lending rate. By offering incentives to private stakeholders, it not only speeds up the funding process, but it also boosts the affordability segment, giving the average home buyer more options to choose from.

On the 1st of February, all eyes will be glued to the Finance Minister - will she be able to address all the pressing concerns that limit the Indian economy in its current phase. The Indian economy has weathered several crises, since its autonomy. However, coupled only with the right policies, can the India growth story, continue to be written.