The real estate sector was already in bad shape before the COVID-19 pandemic, which has only added to the troubles of the distressed industry. April and May were probably the worst months when the economy was broken badly, however recently there has been a good spike in the recovery of the real estate sector and demand for home loans has gone up evidently.
Even the tax collections on account of GST has been on a surge. These are surely good signs of growth in the sector during the unlock process in the country, and while it is a positive development, it is not reflective of a recovery in the sense of the economy moving from a trot to a gallop.
With policy support from the Central Government, the real estate sector is displaying signs of growth, and sales numbers are increasing across cities. To boost housing demand, the Finance Minister had announced measures like an additional outlay of around INR 18,000 crores for PM Awas Yojana. This relief is expected to lift the demand, particularly in the affordable and mid housing segments. Likewise, a record low rate of Home loans, relaxation on Stam Duty in a few states & RERA Regulation have been instrumental to motivate investors to invest in Real Estate.
Due to the COVID-19 pandemic, the concept of a holiday home or a second home has gained widespread acceptance. With most of the corporate professionals working from home, geography is no longer a constraint. The need for a perfect balance between work and personal life has fuelled the concept of a weekend retreat in a holiday home.
From the investment perspective, second homes in non-metro cities are a relatively safe investment option with higher capital appreciation compared to homes in metros, especially during COVID-19, when alternative options such as mutual funds, shares have seen diminishing returns. These properties can be rented out to home-stays and tourism businesses, a booming market promising an assured and stable source of income to investors.
However, home loans for holiday homes are rarely available. Most of the time banks ignore funding under construction holiday homes especially to those customers who are desperately looking for it. We think, govt. can extend support in creating such policies that will benefit the players as well as people who are willing to spend on holiday homes.
To further speed fast the government vision of ’Housing for All’ and to give an impetus to struggling Real Estate Sector, Industry is hoping that the Government will re-visit the present limit of INR 2 Lakhs for Interest on Housing Loan U/s 24(b) of IT Act, and Cap of this INR 2 Lakhs in Interest would be waived off. It will be instrumental in allowing some tax relief to buyers and providing a much-needed push to the Industry.
Keeping a positive outlook for the upcoming budget, we are hopeful to see relaxation in income tax norms, offer single-window clearance and GST reforms. Additionally, helpful measures like easing out of the liquidity issues that are being currently faced by the sector will boost investment in real estate.