From ET Realty
The realty sector is just emerging from a painful slowdown, and is looking for any signs of light at the end of the tunnel. This fact makes Union Budget 2016 all the more crucial for the sector. Financial protection from project delays to introduction of FDI to the GST Bill, this budget expects these and many more.
One of the major hurdles that are holding back the growth of the sector is delay in construction which increases the costs too. On purchase into an under-construction property, buyers can only claim tax benefits of Rs. 2 lakh after possession if construction is completed within three years. The benefits reduce to Rs. 30,000 if the builder delays construction beyond this. In this mess they end up paying higher interest. First-time home buyers purchasing properties for self-use additionally pay rent.
“Instead of allowing home buyers tax benefits post-possession, the Union Budget should make a provision that allows these from the time they start paying interest on housing loans. This will ease their monetary burden considerably and increase the velocity of home loan disbursements. Similarly, if an under-construction property is purchased from capital gains, its construction must be completed within three years of its sale to avail exemption. There can be delays by developer in such cases too. These deductions should be brought at par and the construction timeline should be extended from the current three years to five years,” said Anuj Puri, Chairman & Country Head, JLL India in his blog.
Tax deduction limits is another major issue which needs to be addressed before it’s too late. The government should increase the tax deduction limit for housing loans, especially for buyers in metropolitan cities. The current limit of Rs 2 lakh is insignificant given the ticket sizes in cities like Mumbai, where most houses are priced at Rs 1 crore and above.
“Also, tax concessions on house insurance premia could be introduced to encourage end users to insure their homes. Similarly, the tax exemption limit should be increased by about Rs 1 lakh and be auto-set to match inflationary trends in a financial year,” added Puri.
Green is the solution for a sustainable future. But unfortunately most home buyers in India are averse to paying an extra premium for such projects. The Budget should increase the demand too by providing clear and convincing benefits to buyers of green real estate in the country.
“Although the previous Budget prioritised affordable housing, the upcoming Budget should allocate an amount specifically for building infrastructure and improving connectivity in the peripheral areas of cities, especially the metros. Without this, it will be difficult to provide affordable housing in the cities. Developers entering this segment should be allowed cheaper financing options, thereby also providing a shot in the arm for government’s ‘Housing for All by 2022′ target,” he stated.
The next big thing in this year’s budget would be the GST Bill. The Finance Minister should announce a specific date for the implementation of GST.
“This major reform will give the industry a very clear taxation structure and induce a major change for the logistics architecture, since logistics will be driven by cost and not by a regulatory regime,” Puri said.
Transparency and single window clearance is the call of the moment.
“We are pinning a lot of hopes on the upcoming budget. Getting infrastructure has been long pending demand of real estate sector and this time too we expect the sector to be given infrastructure status so that developers can avail finances at cheaper rates from financial institutions. Also, we are eagerly waiting for single window clearance system so that approvals are given in a pre-defined timelines, furthermore bringing transparency in the overall working system,” said Manoj Gaur, President, CREDAI NCR and MD, Gaursons India told to media.
Also, one should not forget the much awaited Real Estate Regulatory Bill. Maybe this budget season will see the light of it.