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BUDGET expectations

Pinning hopes on the FM

Weeks preceding the Union Budget are usually marked by expectations that are translated into suggestions and recommendations by different stakeholders in the realty sector.

Pinning hopes on the FM


Geetu Vaid

Weeks preceding the Union Budget are usually marked by expectations that are translated into suggestions and recommendations by different stakeholders in the realty sector. And this year is no exception as with less than two weeks to go for the presentation of the Budget by the Finance Minister, a number of suggestions regarding budget provisions that can give a boost to the tepid market are doing the rounds. While experts and market analysts have their  carefully curated list of suggestions, several industry bodies have even organised special sessions and sent memoranda to the government about the fiscal measures that will breathe some life in the slowdown-hit market. 

The National Real Estate Development Council (NAREDCO), an apex body of real estate sector in its pre-budget memorandum has laid stress on measures that will increase the purchasing power of the homebuyers and more incentives for the developers so that the demand and supply balance is maintained in the property market.

While the FM has steered clear of populist measures and focused on  Housing For All and transparency over the past three years, this time the hopes of some happy tidings are high.

Eyeing tax breaks

Topmost on the common man’s list is increase in cap of interest paid on home loans. Currently, this is at Rs 2 lakh and the expectation is that the FM will increase it to at least Rs 3 lakh. With this being the last full Budget of the current government before 2019 elections, common man is hopeful of more populist measures this time, especially after the hard and hitting corrective steps like demonetisation, RERA and GST handed out in the past 18 months. the tax break forhe common man’s list increase in cap of interest paid on home loan, by home buyers, from Rs 2 lakh to Rs 3 lakh. The first-time homebuyers are also hoping for higher income tax benefits. At present under Section 80 EE  the first-time homebuyers can avail of  additional tax deduction of up to Rs 50,000 over and above the Rs 2 lakh limit under Section 24 of the Income Tax Act. “This bracket should be increased up to Rs 1 lakh to incentivise first-time homebuyers”, says Ramesh Nair, CEO and Country Head, JLL India.


Long-pending demands

While the homebuyers are hoping to get some attractive top ups in the existing rebates and sops, the developers lobby has two of its long-pending demands on the top of its wishlist for this year. Industry status for the real estate sector is the first on their list. With the government according infrastructure status to affordable housing last year , industry mavens have intensified the demand for industry status for the sector on the whole this time.  This move will give a boost to the sector wqith private builders getting access to cheaper finance options besides tax exemptions on revenue and profits.  “Industry status is something which is long overdue to enable developers to get better access to funds and also incentivise homebuyers to create demand for the sector, which is facing a lot of challenges at present”, said NAREDCO Chairman Rajeev Talwar.

Single-window clearance for projects is another long-pending demand on which real estate experts want a decisive move this year. With the implementation of RERA, speedy approvvals for projects from different departments has become imperative. With the builders under pressure to complete the projects within a stipulated time frame,  delay in grant of approvals can be a costly affair.  According to Anuj Puri, Chairman - ANAROCK Property Consultants, “If implemented, single-window clearance can significantly reduce the overall projects cycle time and developers will be able to focus on their core business of project execution. Post-RERA, it has become all the more important to facilitate smooth clearances and approvals so that there are no execution delays due to procedural hindrances”.

GST— The balancing act

While developers across the board have been ruing the fact that GST norms have been lacking clarity, lowering GST for realty projects has been the key concern as 12 per cent GST on under-construction properties is higher than the previous taxes. NAREDCO’s most important demand is to bring housing under construction in 12 per cent GST rate from 18 per cent now with 50 per cent abatement for land from prevailing 33 per cent. This will bring tax rate at the level of around 6 per cent of the property cost. The Government should strive to make GST a tax-neutral proposition so as to help in reviving demand in the real estate sector. Clarity and transparency on input tax credit will also help in rationalising the taxes”, adds Puri.

Expanding affordable kitty

The focus of last year’s Budget was clearly towards the affordable housing as well and achieving Housing For All by 2022 target. A slew of incentives and the government focus have drawn a number of developers towards affordable housing projects but there is a lot of scope in this segment and some more provisions in this year’s Budget can give a greater thrust to this segment.  As Section 80IBA provides for deduction of 100 per cent of profit derived from such business, NAREDCO proposes that the entire housing from 30 to 150 sq. m carpet area, under PMAY, should be brought under the purview of Section 80 IBA of IT Act 2016, to incentivise private developers to take up affordable housing construction at large scale to meet the supply requirement of 20 million houses by 2022. 

Incentivising rental housing

Incentives for rental housing in the country can also go a long way in fulfilling the need of suitable living spaces for different groups. Taxing  income from renting of housing properties at flat 10 per cent rate will incentivise rental housing. NAREDCO has  suggested increasing deduction limit from 30 per cent to 50 per cent. 

Rationalising  taxation on REITs

With stage set for the roll out of first REIT by the end of this year,it is time to simplify the tax norms on REITs. “While taxation issues such as dividend distribution tax, long-term capital gains tax on transfer of units have been resolved, REITS still need to pay Stamp Duty charges at the state level. The government should consider convincing the states to exempt REITs from Stamp Duty for, at least for the initial few years”, says Nair.


Industry speak

}Developers have launched several projects to cash in on subsidies under PMAY elligible projects which include several affordable housing projects pan-India. There is definitely stable demand for ready-to-move-in, resale properties and about-to-be- completed projects and we can see developers rushing to complete their launched projects. Affordable housing segment is a key pillar of Indian government’s ‘Housing for All’ policy and we can expect some positive announcement on it in the upcoming Budget. Rs  

—Samir Jasuja, founder and CEO at PropEquity

}GST should be a tax-neutral proposition, which will help revive demand for the sector. Tax rationalisation on REITs should be worked on by the government making it a viable tax structure and thus easing and enhancing the investment options. Incentive by the government to make land available at a cheaper cost of capital to promote the affordable housing sector will significantly help in achieving ‘Housing for All’ targets. Rs

—Rattan Hawelia, Founder & Chairman, Hawelia Group

}There should be no constraints and allowance must be given on the entire interest of housing loan as a deduction for taxation purpose that will again fuel demand for housing. We also expect that the housing loss set-off limit should be increased from Rs 2 lakh. It would be helpful if an additional limit is set for the principal amount of the home loan, as usually this limit of Rs 1.50 lakh under 80C gets exhausted under regular investments like PPF, FDs, EPF, insurance premium and others. Rs  

— Shailesh Puranik, MD, Puranik Builders Pvt. Ltd

}Government must ensure that large steel companies do not face the shortage of raw materials by providing them the required support. This will lead to sustainable and price-stable supply of steel ensuring speedy progress in the construction activity thereby assisting in completing the projects on-time, which is now a compliance requirement as per RERA guidelines. Also, some concrete steps are needed to be taken to ‘insulate’ steel and cement prices. Rs

—Rohit Poddar, Managing Director, Poddar Housing and Development Ltd.

}We need abolition of stamp duty, which continues to remain in force even after the implementation of GST. As a result homebuyers have to pay much higher price than before. Rs

 —R.K Arora, Chairman, Supertech Ltd.

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