Budget 2023: Parity In Capital Gains Structure Needed For Various Asset Classes

2022 was a landmark year for the Indian real estate sector, with residential housing sales increasing by over 50% in comparison with 2021. However, there are challenges that need to be addressed to sustain the momentum. Given that the real estate sector is amongst the largest employment generators in India, the boost to the sector amplifies the employment opportunities for a large mass of population. Few of the measures which could be deliberated in the upcoming budget include:

Bringing parity in the capital gain structure for different asset classes including real estate

The current capital gain structure is different for different classes with variations in even short and long-term capital gains. There needs to be a parity in the capital gain structure across asset classes.

'Carried interest' in PE/ RE funds should be classified for capital gains treatment

Re-calibrating the GST regime for the sector

Due to unavailability of input tax credit in the hands of developer and high GST slabs (18% & 28%) on key raw-material items such as steel and cement, developers have to pass on these costs to the end-users. Any course correction in the GST shall improve the affordability of properties in the hands of the eventual buyer.

Update required for definition of affordable housing

Current definition of affordable housing which caps house prices at Rs. 45 lakhs in metros and Rs. 30 lakhs in non-metros is not in line with the prevailing prices and requirement of the masses and therefore fails to provide much-needed relief to the masses. It is important to increase these limits to deliver the essence of "Housing for All"

Also, time limit for tax holiday under section 80 IBA which lapsed on 31st Mar-22 should be brought back to continue the much applauded PMAY scheme.

Long-due 'Industry' status to the Real Estate sector

With an 'Industry' status, real estate will be able draw equity investment, restructure its debt and borrow at cheaper interest rates ultimately benefiting end buyers and driving the industry for millions engaged.

(The author, Sharad Mittal is Director & CEO, Motilal Oswal Real Estate Funds)