India is witnessing a humongous surge in its consumer base, resulting in a demand for housing to all class populations of the country. Every Indian, in today’s age, fancies acquiring a home and create an asset base. With the objective to suffice this basic need of every Indian, The Government of India has launched a bold initiative of making housing affordable to all by the end of 2022. Furthermore, the government has also announced its goal of turning 100 ordinary cities into smart cities by the end of 2019.
In 2016, the Union Cabinet of India passed the Real Estate Bill. This particular government bill holds profound significance and has infinite positive measures for the real estate industry of the country. Thanks to this bill, India is currently witnessing a favorable time to lead the real estate segment towards affordable housing objectives.
Although there is very little to complain about the announced positive initiatives, real estate still remains a tad bit obscure in the minds of a common man of India. Therefore, the Government of India should consider introducing peculiar tax incentives in the upcoming budget in order to make the real estate sector of India more affordable and attractive.
1. Provide an increase in the timeline for under-construction properties
As per the current scenario, for any constructed or under construction properties, the timeline for re-investment is 3 years. However, sometimes, approvals for development may get delayed, which results in a delay in the development of a project. Besides, the exemption limit of Rs. 2 lakhs on interest on home loans reduces to Rs. 30,000 if the property is still under construction within 3 years of starting the construction.
In the mentioned timeline, such kinds of delays need consideration otherwise, such delays in construction can put the home buyer in an uncomfortable financial situation.
2. Higher tax deduction for repayment of loans
The Government has already increased the limit for deduction of principal towards a house property loan from Rs. 1 lakh to Rs. 1.5 lakhs; however, as per the amendment in section 80C of the ITA in 2014, the government can further increase the deduction amount to a significant level that can bring a substantial benefit to the home loan buyers.
3. Implementation of Goods and Services Tax (GST)
At present, the total of VAT and service tax along with stamp duty that is passed on by developers to home buyers is nearly 10% of the total value of the property. Now, unfortunately, there is always an overlap of both the taxes (VAT and service tax) on the tax base of a construction contract. Even worse, the facility of cross utilization of credit is not made available on VAT and service tax payable by Builders at the time of constructing the property and while purchasing items from suppliers. As a result, the total cost of the building goes remarkably high, making the purchase costly for buyers.
What is happening in the Parliament Sessions?
As we all know, to pass the bills in the parliament, it needs to be pushed through the legislation. The BJP government is leaving no stones unturned in ensuring that the Goods and Services Tax (GST) Bill and the Real Estate Development and Regulation Bill get passed by the end of 2016. These two bills are considered as ‘priority bills’ for the ruling government, and these bills are likely to see the light of the day once it gets passed in the Rajya Sabha and then in Lok Sabha. But, of course, like with all the bills, these bills too would require patience and a tad bit of political manoeuvring of MPs in both the houses.