The National Real Estate Development Council (Naredco) has demanded that infrastructure status be given to the real estate sector and taxation-related incentives be increased to enhance purchasing power of home buyers.
In a memorandum submitted to the government, the builders’ body has asked for infrastructure status to the housing sector, at least to cover the low and MIG category housing units. Doing so will attract large companies to the sector and inculcate corporate governance. “For the sake of convenience and uniformity in law, built-up area mentioned in the Income Tax Act should be replaced by the carpet area as defined in the Real Estate (Regulation and Development) Act 2016,” says Naredco president Praveen Jain, adding there should be parity in both cases.
Under the Pradhan Mantri Awas Yojana scheme, builders who construct 60 sq m housing units get an exemption under Section 80 I B of the Income Tax Act that uses the word built-up area and not carpet area. Naredco members want the built-up area to be replaced by carpet area so that there is uniformity in usage.
About housing loans, Naredco wants interest rates to be brought down to 7% or 8%. Builders should also pay just 10% or12% interest on loans on their projects and a moratorium should be placed on repayment of principal amount of all pending and new loans for three years, to help developers struck with delayed / stalled projects. “This will help in the early revival of the real estate sector and mitigation of problems faced by consumers as well as developers,” Jain says.
As the government moves to implement the Goods and Services Tax (GST) in the country, the real estate sector should be brought under its purview merging all taxes, duties, charges and cess through land use conversion charges (agriculture to non- agriculture and from one land use to other land use), development charges, and subsequent possession related charges (stamp duty, transfer duty, VAT, service tax etc.). This will put the sector on a high growth path and will help achieve the target of building two crore housing units by the year 2022 under the Pradhan Mantri Awaas Yojna, Naredco suggested.
A number of other taxation-related incentives were proposed to embolden the purchasing power of buyers. These included raising the ceiling of Rs 1.5 lakh under Section 80C to Rs 2.5 lakh. Rs 1 lakh out of that amount should be exclusively reserved for payment of principal borrowed for the purchase of a residential property. This would boost housing stock as well as sales, Naredco said.
The builders’ body also suggested that the deduction on account of interest paid on home loans under Section 24(b) be made applicable from the year in which capital was borrowed. As for principal under section 80C, it should be to the extent of full interest paid, at least in respect of one house. If it was not done then the limit of Rs 2 lakh should be raised to Rs 3 lakh for owner-occupied houses. Also, the three-year period for acquisition/completion from the year of borrowing should be dispensed with. This holds ground as a large number of projects are running behind schedule post the global financial meltdown of 2008.