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Reforms on the way in Indian real estate


Reforms on the way in Indian real estate

Last updated: February 12 2007
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  • Reforms on the way in Indian real estate

    For the longest time, most connoisseurs simply assumed that Indian real estate sector has lost its race somewhere, where it retained a competitive edge and proved its potential as no other. It is only now the government has woken up to restrain a jump to bring improvements in India’s property market. Though, there are several projects in pipeline that can provide a real realty boost, but the fine print is yet to come out in most segments of real estate. The reforms are expected to streamline the construction activity all across the board.

    The countdown has begun with simply two weeks to go before the Union Budget. For that reason, the government needs to shift its gears to focus on making its policies firm and more consumers centric. Everyone’s expectations are going high. Let’s start with Continuation of section 80 IB of the Income Tax. This used to be an act favorite of all the property developers as it provided tax relief to them for construction of units less than 1000 sq. ft built up in metros.

    However, the builders will not be able to make a killing in the veil of this act anymore as its benefits have come to an end. A majority of builders, both the renowned and upcoming ones, have created dwelling units under this scheme. Offering mass construction, it undoubtedly proved beneficial to the consumers as well but they lack to share the advantages of tax relief.

    Till now, the Government has been using this act as a powerful encouragement tool for the builders to prompt them to develop houses for middle segment and support the 10th plan estimate of the Government where the shortage of accommodation units is likely to be in the range of 22.4 million sq ft. The real estate market can certainly undergo a paradigm shift if the benefits are passed to the consumer too.

    The average prices of the apartments shoot up past the rooftops into the sky. Under Section 24 of the Income Tax, the exemption of the interest alone on home loans should go up from the present Rs.1.50 lakh to at least Rs.3.00 lakh. The buyers will also be able to avail the tax benefits from the date of booking of the property and not from the possession.

    Also, the government relaxes the norms for TDS deduction on housing rental income for individual home owners. The rate is expected to come down from 16.83% to 10%. Another step has been taken in favor of Non Resident Indians (NRIs), who would be provided with a flat slab of 15% on rental income as they have parked their money in India, and this is the only income against the property.

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