Need Tally
for Clients?

Contact Us! Here

  Tally Auditor

License (Renewal)
  Tally Gold

License Renewal

  Tally Silver

License Renewal
  Tally Silver

New Licence
  Tally Gold

New Licence
 
Open DEMAT Account with in 24 Hrs and start investing now!
« Budget Extravaganza »
Open DEMAT Account in 24 hrs
 All outstanding personal tax demand notices up to Rs 25,000 withdrawn till FY 2014-15 in Budget 2024
 Budget 2024: Why there is an urgent need to hike Section 80C deduction ceiling for income tax benefits
 Budget 2024: Long term capital gains tax and the holding period for different assets explained
 No increase likely in income tax rebate in interim budget: FinMin official
 Income tax expectations for Budget 2024: Focus on medical insurance and capital gains tax
 Whole world looking at India s budget with hope
 Pre-budget expectations for salaried individuals on tax relief Budget 2023
 Centre expected to introduce new income tax slabs in Budget 2023: Report
 Budget 2023: Pre-budget expectations for salaried individuals on tax relief
  Will non-extension of tax benefits for affordable housing impact sales Budget 2022
 Budget 2022 allows 2 more years to file ITR; Know the whopping cost of delay in filing

Union Budget 2017: Here are the expectations of real estate sector
February, 01st 2017

Budget 2017: Three colossal challenges facing the sector today are access to low-cost finance, a painfully tedious process of getting project approvals and little clarity on land titles.

The real estate sector is the largest employer in the economy after agriculture, and is set grow at a compounded annual growth rate (CAGR) of 30 per cent over the next 10 years. By one account, the sector will be worth a staggering $180 billion in revenues by 2020.

Three colossal challenges facing the sector today are access to low-cost finance, a painfully tedious process of getting project approvals and little clarity on land titles.

Policy decisions taken in recent years, particularly in 2016, have laid the foundation for a stronger real estate sector. These include the Smart City concept, Housing for All by 2022, tax reforms such as the Goods and Services Tax (GST), and implementation of sector specific laws to enforce transparency. The Real Estate Regulatory Act (RERA), the Benami Transaction Act, digitisation of land records, demonetisation of high-value currency notes are classic examples of the last category.

The next sets of big-bang announcements for the sector are likely to be announced in the forthcoming Budget on February 1, 2017. Here is a quick wish-list of what the Finance Minister should consider for providing impetus to such an important sector of the economy.

Budget 2017: Link Tax Benefits To Inflation & Cost Of Living, Says Surabhi Marwah of EY India

Infrastructure status: A key demand of the sector for the past few years, such a status will make it easier for developers to access low-cost funds via foreign direct investment (FDI), external commercial borrowings (ECB) and domestic banking assistance. The need for collateral against loans will also stand reduced.

This status will be particularly useful for integrated townships in which social infrastructure such as educational institutions, medical centres, commercial buildings, roads, water supply, sewerage system, sanitation, water treatment, electrification, landscaping, solid waste treatment, horticulture and other civic services forms part of the residential project and the infrastructure requires to be handed over to the local bodies/Government post completion.

Single window clearance and industry status : The red tape and time involved to approve real estate projects has caused the sector much grief. This issue can be addressed by a single-window clearance mechanism that will not only reduce the gestation period of projects but will also insulate them from cost escalations and delays in handing over possession.

Swifter approvals would ramp up supply and help rationalize prices. However, any relief on this front must be supported by in-built checks to ensure construction quality norms are not compromised.

Foreign investment

Both the Centre and state must work together to remove bottlenecks for faster implementation of reform measures in order to promote FDI in real estate. The following steps might merit consideration
i. Opening the ECB route for developers;

ii. Permitting FDI in limited liability partnership (LLP) realty firms;

iii. Obviating performance-linked criteria;

iv. Rationalizing or eliminating multiple local levies and taxes;

v. Reducing lock-in period applicable to FDI investments from three years to 1-2 years;

vi. Greater clarity on entry and exit norms and processes to be followed by investors;

vii. Lowering home loan rates in order to increase buyers’ purchasing power and partially offsetting a likely slump in real estate prices due to demonetization.
Buying A House: What FM Jaitley Can Do For You In Budget 2017

Tax exemption to home buyer: While property prices have risen substantially with time, the corresponding increase in the deduction limit for principal repayments on home loans, available under the Income Tax Act, has remained limited to Rs.1,50,000/-. Further the home loan principal repayments are clubbed with other tax saving instruments. There is a strong case that the deduction for principal repayment should be considered for a separate/standalone tax exemption rather than being clubbed under section 80C of the Income Tax Act. Also the benefit of tax exemption should be available from the date of booking the property and not from the date of possession.

Low cost housing: Presently not many developers are making low cost housing and/or housing for the economically weaker section. Special incentives should be given to developers to make smaller affordable houses as majority of the middle class and lower income persons by default require living in rental apartments and/or particular locality due to non-availability of low cost housing.

Tax incidence on joint development agreements (JDAs): Applicability of service tax on JDAs and development agreements increases the transaction cost and affordability of real estate projects. There are also challenges in availing CENVAT credit for service tax so levied. Clarification on non-applicability of service tax on transfer of development rights is needed.

REIT: SEBI regulations permit developers to transfer their properties to a real estate investment trust special purpose vehicle (REIT-SPV), or to REIT directly in exchange for units. However in the case of latter, capital gains arising on such transfer of property are taxable, skewing the balance in favour of REIT-SPV. Further capital gains earned by a REIT on the sale of units of a REIT-SPV or property itself are taxable in the hands of REIT and not in those of the unit holder. This limits pass-through taxation status for REIT, resulting in additional taxation at the REIT level.

Rationalisation of stamp duty and local levies: Reduction in stamp duty from current rate to a lower rate (e.g. in Maharashtra from 5% to 2.5% ) will bring in more transactions and the revenue will increase for the government. Since the value of the properties have risen, the government benefits anyway.

Relief to income tax payers
Budget 2017: Greater Clarity On GST Expected From FM Jaitley, Says Kunal Chaudhary Of EY India

Companies as well as its employees should be given 100 per cent tax exemption for the rent paid for residential premises taken on leave and license or lease. Alternatively, tax incentives should be provided for renting out residential properties. Currently, rental income is taxed normally. Providing tax breaks on rental income will significantly boost the rental housing segment, and help increase rental supply in the metros and keep the rate of rentals in check.

Cross purchase shouldn’t suffer tax. So if the proceeds from the sale of commercial property are used to buy residential property or vice versa, capital gains tax shouldn’t apply. This exemption should be extended to cases where properties in both categories — residential and commercial — are from the proceeds of a single property.

The long-term capital gains tax waiting period should be reduced to two years from the existing three, and tax rates should be reduced as well, in order to make exits easier in the long run. This will also address the artificial shortage of property and the price hikes due to Sellers inability to sell in short span and pay higher tax.

Taxability of unsold flats in the hands of real estate developers: Currently, constructed properties lying unsold are treated as having been let out, and the notional compensation so earned as income from house property is taxed in the hands of the developer.

Developers don’t fancy themselves as landlords, lessors or licensors. They are in the business of constructing and selling properties, period. Therefore, this provision under the Income Tax Act needs to be revisited and scrapped, and such properties should logically be treated as the builder’s stock-in-trade.

Credit of Cenvat: Currently developers are unable to avail credit of CENVAT of excise duty and service tax paid on goods and services used for construction of buildings resulting in cascading of taxes. The Government may consider permitting of the developers being entitled to avail of such credits and thereby reducing tax burden.

Relax Counter-Productive Clauses in LARR Act: The Land Acquisition, Rehabilitation and Resettlement Act, which was conceived to smoothen the process of freeing up fresh parcels of land for development, have only managed to do the opposite. Despite several amendments to LARR over time, the Act has only served to increase the level of bureaucracy and red tape in the approval of proposals, choking the freeing up of prime land for construction. This has had a deterring effect on both, developers and institutional investors. Given the new government’s focus on ‘housing for all’, fast-tracking of infrastructure and the creation of 100 smart cities across the country, the Budget should present a workable and streamlined LARR Act, with significant relaxation in the currently tedious rehabilitation clauses and other norms.
5 Changes Budget 2017 Can Roll Out To Power-up Real Estate Sector

Greater incentives for sustainable real estate: The 2017 Budget should suitably provide benefits for those buying into green projects, given the general aversion of buyers in India to paying a premium for eco-friendly properties. This, in turn, has deterred developers from executing such projects. This issue can be addressed with the announcement of state-level subsidies so that developers can keep their development cost at par with non-green spaces.

Conclusion
Finally with the likely implementation of RERA in most states this year, a demonetization-induced digital drive, and the adoption of GST, a great deal of transparency is likely to be injected into the realty sector. The move towards a cashless or a ‘less cash’ economy is likely to feed impetus towards this end.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2024 CAinINDIA All Right Reserved.
Designed and Developed by Ritz Consulting