Satish Magar, President, CREDAI (National)
Over the last few years in India, the real estate sector has
to cope with institutional changes including RERA, GST and IBC. The fall in the
growth of GDP from trend rate of 8% to around 5% has also adversely affected
the demand side in real estate. This is because homes are a part of
discretional expenditure by households. Equally, decline in the rate of GDP
entails downward adjustment in demand for shops and offices.
The growth seized of the need to take direct measures for the
revival of real estate sector as a part of measures to boost GDP growth. The
change in IBC, setting up of stressed funds are amongst the steps in the recent
past intended to spur the investments in the real estate sector. The budget
20-21, therefore, would provide the government an occasion to boost the real
estate demand as also continue to encourage private sector investment
particularly in affordable housing, in line with the objective of ‘Housing for
All by 2022’.
A. Income Tax
1. Deduction of interest on Home Loans
An individual is allowed to avail of deduction of interest on loan for acquisition of a house. However, the deduction is allowed only on loans sanctioned between 1.4.2016 and 31.3.2017 and the amount not exceeding Rs. 50,000. Following suggestions are made to boost demand for housing.
i. The timeline for the loan may be extended to March 31, 2022 in line with Housing for All by 2022.
ii. In case of individuals, 100% interest on home loan be allowed as deduction for first home.
iii. 100% interest on home loans to be allowed as deduction for 2nd and 3rd home provided that except self-occupied home, others are rented for a period of nine months during the year. The measure is being suggested to boost rental housing.
An individual is allowed to avail of deduction of interest on loan for acquisition of a house. However, the deduction is allowed only on loans sanctioned between 1.4.2016 and 31.3.2017 and the amount not exceeding Rs. 50,000. Following suggestions are made to boost demand for housing.
i. The timeline for the loan may be extended to March 31, 2022 in line with Housing for All by 2022.
ii. In case of individuals, 100% interest on home loan be allowed as deduction for first home.
iii. 100% interest on home loans to be allowed as deduction for 2nd and 3rd home provided that except self-occupied home, others are rented for a period of nine months during the year. The measure is being suggested to boost rental housing.
2. Section 43 CA
Section 43 CA of Income Tax Act is a barrier to natural price correction and
the stalled project has a cascading effect on home buyers, banks and other
stakeholders and needs to be removed or amended to exempt primary sales or at
least allow sale at 30% below circle rate.
3. Section 80 IBA
i. The following portion of Section 80IBA should be deleted-
“Where the approval in respect of a housing project is
obtained more than once, the project shall be deemed to have been approved on
the date on which the building plan of such housing was first approved by the
Competent Authority.’
There should be an exception to this clause to accommodate cases where the
construction work has not started after sanction of plan and the developer opts
for re-sanction to take up affordable housing.
ii. The benefit under Section 80IBA should be extended to all affordable housing projects as long as the size of the residential units satisfy the limits on carpet area of the units at thirty square meters, where the project is located within the cities of Chennai, Delhi, Kolkata or Mumbai or sixty square meters, where the project is located in any other place.
ii. The benefit under Section 80IBA should be extended to all affordable housing projects as long as the size of the residential units satisfy the limits on carpet area of the units at thirty square meters, where the project is located within the cities of Chennai, Delhi, Kolkata or Mumbai or sixty square meters, where the project is located in any other place.
B. GST
i. The benefit of ITC be restored to real estate GST by charging GST at 12 per
cent with allowance for land cost at 33% on par with current rate of works
contract services for government projects.
ii. Taking into account the output GST being paid on such rentals on commercial leases, the restriction from input tax credit eligibility under section 17(5) (c) and 17(5)(d) of the CGST Act, be removed.
ii. Taking into account the output GST being paid on such rentals on commercial leases, the restriction from input tax credit eligibility under section 17(5) (c) and 17(5)(d) of the CGST Act, be removed.
C. Definition of Affordable Housing
Following definition may be made universally applicable across all Government
agencies-
“Affordable housing comprises units with a carpet area as defined under RERA that do not exceed sixty square metres in the metros and 90 square meters elsewhere.
D. One Time Restructuring
Scheme for Real Estate Projects“Affordable housing comprises units with a carpet area as defined under RERA that do not exceed sixty square metres in the metros and 90 square meters elsewhere.
Liquidity shortage continues to cause distress in real estate. Hence, a one-time restructuring scheme with moratorium on principal and interest of 2 years is immediately needed.
E. Easing Flow of Funds for Housing
Housing Loan up to Rs. 1 crore may be counted towards Priority Sector and interest rates to be below 7% effectively.
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