The government can use this Budget to grant industry status to the real estate industry, a long pending demand. Receiving infrastructure status would help reduce the cost of borrowing for developers and also allow them to tap new sources of funding.
The present affordable housing limits must be enhanced in metros and non-metros so that buyers can avail tax deduction of Rs 1.5 lakh on interest on housing loans availed to buy affordable housing under section 80 EEA of the Income Tax Act, and lower GST rates. Bringing larger houses within the ambit of the definition of ‘affordable housing’ will provide additional homebuyers access to these benefits and have a positive impact on the market trend. In this context, the industry wants to redefine the term ‘affordable housing’ based on ticket size instead of an area of the unit.
For facilitating the robust economic revival of the industry post-economic aftermath of the pandemic, demand creation should be ensured by introducing tax sops for homebuyers especially since most salaried people buy a home by taking a housing loan and use their income to pay such loan.
Key relaxations for Government’s consideration are:
The difference of more than 10 percent between the ready reckoner/circle rate and agreement value of property attracts tax penalties under Section 43CA of the Income Tax Act.
To promote the real estate sector and to make it more attractive for investment, the holding period of immovable property for long-term capital gains computation be reduced to a 12-month period from the current 36 months.
Registration costs for the purchase of land are a significant amount for which the developers do not get any benefit. Since developers are unable to claim the input tax credit (ITC), this is a direct cost for them which ultimately raises the cost of ownership for home buyers. The government should introduce a policy permitting registration costs for the purchase of land as an input tax credit.
The leasehold rights given by local authorities are for periods ranging from 60 to 99 years. Transfer of such leasehold rights are in effect transfer of land and/or building itself as the consideration payable for such transfers is equal to the market value of the property. The government should therefore consider issuing a circular clarifying that transfer of lease rights from local authorities (like MIDC, CIDCO MMRDA, GIDC, NOIDA) will be exempt from GST.
The Centre should consider bringing about a model code that would simplify the approval process for real estate projects. Currently, developers have to go through innumerable regulations for securing necessary permissions, often overlapping multiple authorities and jurisdictions.
To improve the whole process, the government could bring about a model set of regulations, including set timelines for granting or rejecting applications, an appeal system, and nodal officer as well as guidelines on premiums and development charges, etc. The Central government should encourage states to adopt this model code as it could significantly streamline the approval process and result in homogeneity on a pan-India level.
This article was originally published in Firstspot on 30 January 2022 Written by: Ashoo Gupta, Partner. Click here for original article
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