Indian Real Estate Forum - www.indianrealestateforum.com - View Single Post - Real budget expectations in the real estate sector

Happy · 14-02-07

After a span of nearly a decade the government has woken up to reform the real estate sector. The fine print of the many proposals is yet to come out. The developers and builders in India have been having a field day with no control over built up and carpet areas, illegal property documents and constructions, possession related issues and many more illegal entanglements.

The government, this year, should act in ways wherein the consumer’s interest is protected. A few expectations, which one could have from the budget, are as follows:

1. Continuation of section 80IB of the Income Tax Act
This section gives tax relief to the builders for construction of units, which are less than 1000 square feet built up in metros. The benefits under this section come to an end from this year. A lot of builders have created houses under this scheme and consumers are benefited through the mass construction. The only problem here is that while the builder gets the tax relief there is nothing passed on to the consumer. A majority of homebuyers are unaware of this tax respite, which the government has given to the builders. The government should continue giving this subsidy to the builders as this will encourage them to make more middle class and affordable homes and it also will support the 10th plan estimate of the government where the shortage of housing units is expected to be in the range of 22.4 million square feet.

2. Increase exemption limit under section 24
Under section 24 of the Income Tax Act, the exemption of the interest alone on the home loan should go up from the present Rs 1.5 lakh to at least Rs 3 lakh. This is suggested keeping in mind that the average ticket size of the price of the apartment has grown 100% over the past few years. Also, the benefit of tax should be given from the date of booking of the property and not from the possession.

3. Tax Deduction at Source to be brought down
TDS on housing rental income for individual homeowners should be brought down from 16.83% to 10% and especially for NRIs (Non Resident Indians). A flat slab of 15% should be considered on rental income for NRIs, as this is their only income against the property. This will improve the demand and supply situation as more and more incentives are given and passed on to both the licensor and the licensee. A lot of NRIs lock up their apartments for fear of higher taxation and an upfront TDS more than 30%, which affects their rate of return. Further, the standard deduction of 30% towards maintenance should be increased to 40% for local residents and 50% for NRIs.

4. No service tax to be charged to property buyers
A lot of builders have started charging clients service tax. However the rule was very clear, that if the builder hires an outside contractor to build the units then he would have to bear service taxes. The consumers or flat buyers should not be levied any service tax as they are buyers and they are paying stamp duty and registration fees to the government for buying the property.

5. Stamp duty charges should be reduced
Stamp duty charges should be reduced to 2.5% from the current 5% as this will bring in more transactions and the revenue will increase for the government.

6. Issue more capital gains tax saving bonds
Under section 54 EC, the government should issue capital gain bonds of at least Rs 20,000 crore, as compared with last year when bonds issued were only of Rs 6,500 crore. The interest given on these bonds should be linked to bank interest rates on fixed deposits.

14-02-07	#1
Happy Member Join Date: Jan 2007 Posts: 105 Thanks: 0 Thanked 0 Times in 0 Posts	Real budget expectations in the real estate sector After a span of nearly a decade the government has woken up to reform the real estate sector. The fine print of the many proposals is yet to come out. The developers and builders in India have been having a field day with no control over built up and carpet areas, illegal property documents and constructions, possession related issues and many more illegal entanglements. The government, this year, should act in ways wherein the consumer’s interest is protected. A few expectations, which one could have from the budget, are as follows: 1. Continuation of section 80IB of the Income Tax Act This section gives tax relief to the builders for construction of units, which are less than 1000 square feet built up in metros. The benefits under this section come to an end from this year. A lot of builders have created houses under this scheme and consumers are benefited through the mass construction. The only problem here is that while the builder gets the tax relief there is nothing passed on to the consumer. A majority of homebuyers are unaware of this tax respite, which the government has given to the builders. The government should continue giving this subsidy to the builders as this will encourage them to make more middle class and affordable homes and it also will support the 10th plan estimate of the government where the shortage of housing units is expected to be in the range of 22.4 million square feet. 2. Increase exemption limit under section 24 Under section 24 of the Income Tax Act, the exemption of the interest alone on the home loan should go up from the present Rs 1.5 lakh to at least Rs 3 lakh. This is suggested keeping in mind that the average ticket size of the price of the apartment has grown 100% over the past few years. Also, the benefit of tax should be given from the date of booking of the property and not from the possession. 3. Tax Deduction at Source to be brought down TDS on housing rental income for individual homeowners should be brought down from 16.83% to 10% and especially for NRIs (Non Resident Indians). A flat slab of 15% should be considered on rental income for NRIs, as this is their only income against the property. This will improve the demand and supply situation as more and more incentives are given and passed on to both the licensor and the licensee. A lot of NRIs lock up their apartments for fear of higher taxation and an upfront TDS more than 30%, which affects their rate of return. Further, the standard deduction of 30% towards maintenance should be increased to 40% for local residents and 50% for NRIs. 4. No service tax to be charged to property buyers A lot of builders have started charging clients service tax. However the rule was very clear, that if the builder hires an outside contractor to build the units then he would have to bear service taxes. The consumers or flat buyers should not be levied any service tax as they are buyers and they are paying stamp duty and registration fees to the government for buying the property. 5. Stamp duty charges should be reduced Stamp duty charges should be reduced to 2.5% from the current 5% as this will bring in more transactions and the revenue will increase for the government. 6. Issue more capital gains tax saving bonds Under section 54 EC, the government should issue capital gain bonds of at least Rs 20,000 crore, as compared with last year when bonds issued were only of Rs 6,500 crore. The interest given on these bonds should be linked to bank interest rates on fixed deposits.