NEW DELHI (INDIA): India’s Finance Minister Arun Jaitley is all set to present the Union Budget for 2017-18 on 1stFebruary.This would be his third full-year Budget. So all eyeballs on his briefcase, what Jaitley is going to present for India.
Lets go through Real Estate Management Institute (REMI), and Nirmal lifestyle pre-budget expectations from Jaitley.
Shubika Bilkha, Business Head at REMI
“Given the impact that the recent demonetisation initiative has had on the sector, as well as the impact of increased regulatory vigilance, the real estate industry is hoping for added confidence boosting measures in this years budget. With its significant contribution to GDP and overall employment in the Country, the sector has also long awaited ‘industry status’ that it remains hopeful for in this years budget.
To meet the stipulation of timely delivery of projects under RERA 2016, the need for the introduction of a single window clearance has never been more heightened. Furthermore, with the impending introduction of the GST regime, there is a need for added clarifications to determine the overall impact on the sector.
Additionally, with the regulations under RERA 2016 reducing the opportunity for funding through advance bookings and banks not being able to support financing of land transactions, simplifying the tax regime of REITs has become essential. This will include reducing the level of taxation on REIT income, having a waiver for capital gains tax for REITs on the transfer of property and making leasing of premises more attractive and less subject to the high service tax rates.
To boost consumer demand in the sector, the industry hopes for more favourable taxation measures to be introduced by the government. These include increasing the tax deduction limit for housing loans to make it more in sync with the high cost of real estate in metropolitan India, raising the House Rent Allowance (HRA) and encouraging consumers to adopt home insurance through tax concessions on premiums.”
Union Budget expectation by Mr. Dharmesh Jain, President, MCHI-CREDAI and CMD, Nirmal lifestyle.
BUDGET 2017 Expectations of Real Estate Sector
The Government of India’s objective to achieve the goals under the ‘Housing for All by 2022’ Scheme is one of the landmark schemes under the dynamic leadership of our Prime Minister, Narendra Modi.
An estimated housing stock of 2 crore new houses is aimed by the Government under this noble scheme. The government needs private players to ensure the creation of more than 2 crore new homes in the next 5 years. The government also needs private players for good quality homes.
Hence, it is important that the government makes certain re-alignments in this scheme along with certain other measures that would ensure the success of this initiative, for the larger good of the masses.
For Starters, we expect Budget 2017 to be a big stimulant for Real-Estate Sector considering the direct impact of demonetization and indirect impact of dormant market sentiments. Post radical financial reforms, Tax reforms & rationalization are need of the hour and will act as confidence boosters if tax deduction limits are substantially raised under 80 C and for first time home – buyers which is currently insufficient. Separate deduction for principal component of home loan will certainly boost the sentiments which is currently clubbed with other instruments under 80-C which are primarily small savings & insurance driven.
Under Section 24 – D interest rate is capped at Rs. 2 Lakhs which is insufficient and should be raised to at least Rs. 5 Lakhs for first five years as interest component is very high during this period. Alternatively, home buyers should be able to claim full rebate under 24-D for loan against property value of Rs. 50 Lakhs. As for Section 54-F, exemptions from Capital Gains in case of investment in residential house, the 2014 Finance Act amended the section 54F to restrict the exemption only for investment in one residential house within India. Why restrict the exemption to one? This restriction results into undue hardship to the assesses even in cases where the investment is genuine. Amendment in this section will encourage home buyers to invest in the real estate and increase the demand and will also enable industry to crystallize the vision of Government of “Housing for All” by 2022.
We suggest a few amendments in the Scheme of Housing for All that would have a greater impact and would act as a catalyst in achieving the set targets under the said scheme.
1. We suggest revision to the definition of Residential Unit for affordable housing, which is currently at 30 sq.mtrs. area in metro and 60 sq.mtrs. in non-metro, our suggestion is to revise the same to 60 sq.mtrs. carpet in metro and 90 sq.mtrs. carpet area in non-metro.
2. Since the last budget, tax relief was given on interest payment on home loans if the property bought or under construction is completed within 5 years from the end of financial year in which the loan has been availed. In view of the same the timeline for completion of an affordable housing project should be raised from 3 years to 5 years under the said scheme.
3. At present under the Scheme, Service Tax exemption on all affordable housing projects as defined under the Act. We recommend that GST exemption on all affordable housing projects as defined under the act.
4. We also suggest that for the housing cost of Rs. 50 lacs the loan amount should be raised to an amount of Rs. 40 lacs (as against Rs. 35 lacs, at present, under the scheme).
5. We suggest that the additional interest deduction of Rs. 2,00,000/- to buyer towards interest on loan. This amount is over and above the deduction of Rs. 2 lacks u/s 24 under ‘Income from house property’. This will give a major thrust and boost to the development of smart cities across India, this will also positively transform and urbanize tier II and tier II cities. A higher limit of interest exemption will accelerate the demand for housing in this segment and thereby bridge the gap between the current demand and government vision.
6. Lastly, affordable housing falling under Section 801BA is recommended to be classified under infrastructure industry.