With the Union Budget 2022 on the horizon, here’s a look at what the real estate sector expects from Finance Minister Nirmala Sitharaman. In our special segment of Budget Countdown, CNBC-TV18’s Latha Venkatesh spoke to Srini Sriniwasan, managing director, Kotak Investment Advisors Ltd and Niranjan Hiranandani, Managing Director, Hiranandani Group.
Hiranandani affirmed that what he expects is first and foremost, a boost to rental housing. On this account, he requests the government to increase standard deduction from 30 percent to 50 percent. He is of the view that rental income, which was made tax deductible in the last budget will give further boost to the sector but further details on the same are still awaited.
He said, “All the investments in the market have certainly given a booster because it was capital short. What I am looking for is a boost to rental housing. I think the returns on rental housing and you will see it is around 2.50 to 3 percent returns on rental housing, residential home housing, rather than in the case of commercial. So we are requesting that the standard deduction which is presently 30 percent should be brought about to 50 percent so that investments into rental housing could also be pushed up because that is the need of the day.”
Additionally, Hiranandani believes raising the standard deduction of home loans to Rs 5 lakhs should be the next logical move. He expects it to aid and benefit the salaried employees to invest into residential homes.
“The standard deduction in terms of home loans is restricted to Rs 2 lakhs. Now this was long, long, ago I don't even remember the year. But now looking at the amount and the prices of housing being what it is and loans available up to 80-90 percent, the standard deduction needs to be pushed up to Rs 5 lakhs in order to see that the salaried income people and other people are able to invest into home. So the amount of Rs 2 lakhs in standard deduction needs to be pushed up to Rs 5 lakhs, which is really required,” Hiranandani said.
Meanwhile, Sriniwasan believes the Centre has done its part by taking up the model Rental Act. He feels it’s the states that are lacking in regulations in the rental market.
“Real estate being a state subject, each of the states needs to modify their rental regulations, so that there is an even balance between the landlord and the tenant. So that is an area where various states are lacking,” he mentioned.
Further, Sriniwasan believes the most significant change that SEBI has brought about is creation of a special category of special situations fund. The idea was that it enabled notified category of funds to partake in the non-performing loan market.
He said, “The most significant change that the recent board meeting of SEBI has done is to create a special category of special situations fund. This was a follow-up to Reserve Bank of India's guidelines where they permitted other notified category of funds to participate in the non-performing loan market.”
According to him, business income on non-performing loan investments should be allowed as a pass-through. He explained that when investments are made in non-performing loans, profit is accounted for as business income.
“As the regulations stand today, business income does not enjoy a pass through under the regulations. As an industry what we are simply asking for is that business income on non-performing loan investments should be permitted as a pass through. We are not asking for a tax break, we are just saying that whoever is an investor will pay whatever is his tax that is due from him,” he explained.
Watch the video for the full interview