Real Estate Investment Trusts (REITs) have not come up till now due to the policy constraints. REITS has the potential to pull up the declining real estate sector of India. Government may announce schemes like Reduced level of taxation of REIT income, Simple structure with fewer hurdles, Waiver of capital gains for the developer at the time of transfer of property into REIT, Removal of service tax on lease premises,Low borrowing cost etc. to open the way for the realty sector to get easy funding and ensure timely completion of projects, say developers. It is expected that that we will not see any REIT listing in the absence of aforesaid reforms.
The real estate sector of India is eagerly awaiting clarity in the Goods and Services Tax (GST) structure on the slabs for the real estate sector. Taxes need to be reduced, especially for the affordable housing segment. Affordable housing may be made exempt from service tax under the GST. This will also encourage the Indian government’s scheme for ‘Housing for All by 2022’.
3. Tax benefits for home buyers
Government may announce tax benefits for home buyers in the Union Budget 2016-17 by way of greater exemption in the interest paid or principal repayment on housing loans etc. A deduction in stamp duty can also bring boost to the sector. Government may completely separate deduction applied to the principal instead of just clubbing it under the broad investment opportunities of Section 80C like PF,PPF, Insurance etc. The current limit of Rs 2 lakh is insignificant, given the ticket sizes in cities like Mumbai and other Metros where most houses are priced at Rs 50 Lakhs and above.
4. Imparting industry status to the realty sector
Real Estate Regulatory Act was passed in the year 2016, but its full impact is yet to be felt. The Real estate sector of India contributes to over 15% of India’s GDP. It has been asking for industry status for quite some time now.Government may impart the much awaited industry status to the Indian real estate sector.
5. Promoting single-window clearances, for ease of doing business
Government may announce single-window clearances in Real Estate Sector to help the builders grow and execute its projects on time. This will enable grant of various government approvals in a timely manner.
6. Hike in HRA exemption limit
Government may announce hike in HRA exemption limits. Salaried employees 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 which is a very small amount.
7. Additional incentives for the first time home buyers
Tax incentives to first time home buyer’s would encourage them to invest in the India realty sector. Any efforts in this direction would help the government move closer to its objective of delivering ‘Housing for All by 2022’.
8. Digitize all land records
9. Clarity on beneficiaries under PMAY
The government recently announced that interest rates of 3% would be applicable on loans of up to Rs. 12 lakh and 4% on loans of up to Rs 9 lakh, under the Pradhan Mantri Awas Yojana (PMAY). The Union Budge 2017 may provide more clarity on the actual definition of beneficiaries who can avail all these benefits.
10. Financial protection from project delays
The deduction on interest of self-occupied houses is applicable for Rs 2 lakh. However, if the construction is completed after 3 years, then the deduction is just Rs 30,000 in case of under construction residential properties. The delay in construction by builders has caused serious problems to property buyers. Government may consider giving interest deduction in such cases from the year in which the possession was due to the buyer as per the terms of the builder buyer agreement.
11. Special benefits to NRIs
NRIs may be provided tax benefits for investments in Indian properties.
India’s realty sector suffered a revenue loss of Rs 20,000 crore after demonetization. Real Estate Sector is on the verge of crashing if government is not able to take appropriate measures in Union Budget 2016-17.
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