Budget 2014: Suggested amendments for real estate
Jul 07, 2014
Source : The Times of India

 

DELHI: The real estate sector happens to be one of the very important sectors for the overall growth of the economy. Since the new government, led by Prime Minister Narendra Modi, has taken a pragmatic view of providing housing to all by 2020, it becomes very important that certain amendments are made in the law for the real estate sector.

Finance Minister Arun Jaitley is urged to take a pragmatic look at the Income Tax Act and think of providing certain amendments in the Income Tax Act which will act as a booster to the ailing real estate sector.

Here are key suggestions for the Finance Minister:

Higher deduction for interest on loan

In 2001, the Finance Minister raised the deduction limit for interest on housing loan from Rs 30,000 to Rs 1,50,000 for individuals and Hindu Undivided Families (HUF).

In the last 14 years, the prices of the houses have gone up. The overall money in the hands of individuals has also gone up and this is evident from the fact that new real estate development and the investment which is made by home buyers is also going up.

Likewise, due to the increase in the salary structure and many more millionaires and multi-millionaires coming up, there is demand for housing. Presently, the deduction available for the housing loan is just Rs 1,50,000 per annum, which means on an average, a house can be purchased for just Rs 15 lakh and the deduction for interest on loan being allowed up to Rs 1,50,000 only.

The government should increase the deduction for interest on housing loan to minimum Rs 2,50,000 especially in view of the rising prices. For a new home buyer, if the entire interest on housing loan is allowed as a tax deduction, surely the sector will boom.

Tax exemption for developers building small housing projects

Presently, the developer has to pay income tax on his income whether he develops a residential house of 1,000 sq ft or 10,000 sq ft. Thus, if the government wants the developers throughout India to construct houses for the common man, it should grant exemption in the income tax to the developer.

In fact, this type of tax deduction was permissible earlier in the past through Section 80IB (10), which provided complete exemption to the developer if a housing project was taken on minimum 1 acre of land and the houses were built up to 1,000 sq ft in metropolitan cities or 1,500 sq ft in other cities of India. The developer should also be asked to cut down the selling cost. Such dynamic approach can help in resolving the housing problem in the country.

Stamp duty rates to be cut down

Throughout India, the rate of stamp duty is different for real estate transactions in different states of India. If the government really expects a big boom and growth in the real estate sector and would like to have fast turnaround of property buying and selling transactions, then it is the right time to bring the concept of stamp duty in India, which is applicable overseas where half per cent or one per cent stamp duty is payable.

Investment restriction on commercial property

Right now, if a person sells his residential property he is able to save tax on capital gains by investing in another residential property. Similarly, if a person sells out his agricultural property, he has got the freedom to invest in another agricultural land and save his Capital Gains Tax.

But, if a person sells his commercial property, he does not have the freedom to reinvest in any other commercial property or a commercial space in a mall or a shop. Hence, the Income Tax Law should be amended to allow investment in commercial property out of the sale of another commercial property to save tax or Long Term Capital Gains.

If this small amendment is made, the government has nothing to lose but the advantage will be that the otherwise dull real estate sector will flourish.

Bring in REITs

In the last nearly ten years, plans have been drawn up by the government to popularise and implement the concept of Real Estate Investment Trust (REIT). This is already a well-developed business concept in USA and other countries of the world. Sometimes back, I met an Indian who is settled in USA and who has 10,000 residential apartments under the concept of REIT.

The government should make realistic rules and regulations for framing guidelines to set up REIT. There should be special provisions for the small investors to form REIT.

Latest Realty News

Naya Raipur spurs Afghans to develop New Kabul City
Jun 24, 2014
RAIPUR: Chhattisgarh may have its name rolling across other countries now, with war-ravaged countries like Afghanistan wishing to learn from the planning and strategies of model city Naya Raipur and implement the same at its upcoming project of Kabul New City.
Misuse of residential plots under scanner
Jun 24, 2014
BHUBANESWAR: The state government has asked Bhubaneswar Development Authority (BDA) and Bhubaneswar Municipal Corporation (BMC) to probe alleged misuse of residential plots for commercial purposes.
Minister in construction row
Jun 23, 2014
BHUBANESWAR: Minister Sanjay Dasburma is among 423 builders against whom the state government has filed cases for unauthorized constructions in the city, housing and urban development minister Puspendra Singh Deo told the Odisha assembly in a written reply on Friday. Dasburma said the information submitted in the assembly was completely wrong.
Housing Prices Can Fall on Transparency, Timely Approvals: HDFC
Jun 20, 2014
Calling for major reforms in housing sector, HDFC chairman Deepak Parekh has said transparency and timely approvals from different authorities can reduce home prices by almost 20 per cent.
Brahma Management to invest Rs 3,000 crore in Indian real estate sector
Jun 20, 2014
Nine years after it was formed, New York-based Brahma Management has lined up big investments for the Indian real estate market . Brahma, an FDI-funded investment and asset management company, has already invested around Rs 2,500 crore in the sector and has plans to put in another Rs 3,000 crore over the next two years.
Mahindra Lifespaces ventures into affordable housing segment
Jun 20, 2014
Mahindra Lifespaces Developers, the real estate arm of the Mahindra group, on Monday launched its new business vertical 'Happinest' that will focus on developing affordable housing projects.
Delhi Development Authority to roll out 'largest-ever' housing scheme by July end.
Jun 17, 2014
NEW DELHI: The largest-ever housing scheme of Delhi Development Authority will be rolled out for city- dwellers by July end, offering over 26,000 flats across various categories with most of them being built with "green technology", a top official of the housing body today said.
Mamata focus on Howrah
Jun 17, 2014
KOLKATA: With the state secretariat now shifted to Nabanna in Howrah, the district is getting more importance. Chief minister Mamata Banerjee wants overall infrastructure development of the district including having more routes for JNNURM buses, giving more permits to no-refusal taxis and implementing the ongoing development projects fast.
Survey ranks Bhubaneswar 2nd worst among 21 cities
Jun 17, 2014
BHUBANESWAR: How good a place is our city to stay? A latest survey puts it second from bottom on factors influencing quality of life among 21 Indian cities surveyed across 18 states. Experts here are divided over the findings.
Chennai’s OMR not desirable anymore?
Jun 15, 2014
CHENNAI: Even about five years back, reasonable property prices made the micro-market Chennai’s Old Mahabalipuram Road (OMR) a desirable destination, but not anymore. The region has been increasingly losing its sheen among Chennai’s home buyers.

Latest Realty News Of State

Realty Talk's