NEW DELHI: Real estate industry has high expectation from the upcoming budget 2016-17. Stakeholders are demanding that central government gives relaxation in income tax rate, provide clarity on GST, raise House Rent Allowance (HRA) deduction and announce policies to standardize construction materials in order to uplift the real estate industry.
Here is what various stakeholders are demanding from the central government:
Sunil Mishra, Chief Business Officer, PropTiger
It’s time for the Industry to acknowledge that demonetisation had a severe impact on sales, as potential buyers kept on postponing their purchase decision, waiting for an imaginary fall in property prices. We expect some confidence-boosting measures in the upcoming budget, which will put more money in people’s hands, and that itself will bring back home sales to pre-demonetisation levels. Under that, specifically, some cut in the tax rates for middle-income groups will be the most awaited measure.
Rattan Hawelia, Founder & Chairman, Hawelia Group
In Union Budget 2017, policies on standardization of major construction material should be addressed so that cartel such as in cement and other supporting industries can be controlled which is affecting the cost of housing to the end user. Moreover, tax clarity on REITs should be worked on by the Government making it a viable tax structure and thus easing the investment options. All such policy reforms will give momentum to the struggling real estate sector and 2017 can be the year of remarkable progress in real estate.
Anuj Puri, Chairman & Country Head, JLL India
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.
While the goods and services tax (GST) tax structure has been announced, the real estate industry is waiting with bated breath to see which tax rate is applied to the real estate and construction industry. Clarification would also be needed on the abatement scheme, and whether credit for input tax would be allowed if the composition scheme has been availed by developers.
Salaried persons get house rent allowance (HRA) as a component of their total salary, and can therefore claim a deduction. This deduction can be substantial in cases where the salary and its HRA component are higher. However, self-employed persons and those who draw lump sum pays without an HRA component can only claim a maximum deduction of Rs 2,000 a month under Section 80GG. The Budget can and should address this anomaly.
Sachin Sandhir, Global Managing Director – Emerging Business, RICS
Directly or indirectly, the real estate sector contributes to over 15% of India’s GDP. It has been asking for industry status for quite some time now. In its absence, developers are forced to borrow at high interest rates and comply with a stringent evaluation process. Unavailability of funds at a reasonable rate of interest delays the construction process and increases the final cost of homes, negatively impacting the end consumer. Giving industry status to the entire real estate sector, instead of granting infrastructure status only to the affordable housing segment, would help in pushing the housing demand in India. We hope to see this announcement in the upcoming Budget.
For the real estate sector to really grow and execute its projects on time, various government approvals should be given in a timely manner. Developers have for long been demanding single window clearance to remove bureaucratic delays, which in turn delay delivery of homes. Research by RICS indicates that a single-window clearance system would drastically boost the real estate sector in India.
We have not seen a single REIT listing till date because of the presence of multiple taxes. Until tax hurdles are removed for developers and asset holders, it is highly unlikely that we will see any REIT listing. The government should recognize the capacity of REITs to improve market conditions for the real estate sector and remove the policies constraining their growth. The government should look at:
· Reduced level of taxation of REIT income
· Waiver of capital gains for the developer at the time of transfer of property into REIT
· Removal of service tax on lease premises
Credits ET Realty