Landlords reluctant to rent out their properties may now have an incentive to do so. In order to bring in 15.8m unoccupied dwellings across the country in circulation, the government may consider increasing the limit of tax-free income, from property leasing, to 50% from the existing 30%.
The exercise could be revenue neutral for the public exchequer as the government may simultaneously increase income tax on those residential properties, which are used for commercial purposes. According to a senior government official, the finance ministry is considering a proposal to remove tax on rental income from house property.
The finance ministry has taken stock of our recommendation and has asked us to make changes in some clauses in the policy pertaining to rental income, said an official from the ministry of housing.
Even as the draft National Housing Policy has asked for a complete waiver of tax on rental income, it is understood that the finance ministry may settle for 50%, he added. The National Housing and Habitat Policy, 1998, was formulated to provide shelter besides rationalisation of Stamp Duty and strongly recommended repeal of the Urban Land Ceiling Act (ULC) Act.
The new Draft National Housing Policy has been re-framed to restore interest in housing and making it affordable. The policy has also suggested that residential properties, which are used for commercial purposes, be charged extra tax. The policy is currently under the consideration of committee of secretaries.
It is estimated that several crore people will migrate to urban areas in the next decade as employment in the agriculture sector is falling. Hence, there is a dire need for the government to open up rental accommodations for new migrants to the urban centre providing the incentives to house owners, said a senior government official.
Industry experts said that, if implemented, the move would see a substantial increase in end-user consumption of available properties. Currently, there is no dearth of supply in the real estate market. However, because of speculative buying, many such properties are getting locked.
This move will definitely solve the housing problem to a great extent, Sanjay Verma, joint managing director, Cushman & Wakefield said. Experts add that in the absence of any concrete incentive in the rental market, selling pressures on property owners are also very high.