The real estate sector is waiting unabatedly for the upcoming Union Budget 2018-19 in February 2018. These are the five points that we expect the government to touch upon in this annual budget session to give the much required fillip to the realty market.
This Union Budget 2018-19, the government should focus on implementing some key reforms to spur real estate demand and revive interest in the asset class. This is probably the one industry that generates maximum employment, revenue, taxes at both state and centre levels and above all, solves for the dream that most Indians favour of owning a home in their life time. I would like the government to focus on these five fronts to bring back the mid-income segment into the market.
- The deduction available for interest on loan for acquisition/construction of self-occupied house property is to a maximum limit of Rs 2 lakh per annum and should be increased to at least Rs 3 lakh per annum.
- Pre-construction interest goes without a deduction. Interest on housing loan paid for the period during which a house is under-construction can only be claimed as a deduction in five equal instalments from the financial year in which the house property is completed. Practically, most taxpayers lose out on the deduction for pre-construction interest since this amount is included in the overall limit of Rs 2 lakh fixed for the interest on housing loan deductible in case of a self-occupied property. The deduction for the pre-construction interest should be allowed in the year of payment or a separate limit should be prescribed for the deduction over and above the regular deduction of Rs 2 lakh per year.
- The sector’s biggest expectation from this Budget would be inclusion of real estate in entirety under the GST regime. Hitherto, only under-construction properties are included and sale of fully-constructed properties is not covered under the ambit of GST. This partial exclusion has resulted in denial of input tax credits, cascading of taxes and a case for imposition of other local levies like stamp duty, registration fees etc. Internationally, the precedent has been for inclusion of real estate sector completely under GST.
- As the governments push towards digitalisation and abolishment of “Benami” transactions, substantial budget allocation should be made for digital property data base. This will reduce the ambiguity in the title and transfer of the property and cut down the huge amount of delay and loss of value that arises due to transfer and title related litigations.
- A definite change that we want implemented should be the abolition of 1 percent TDS cost.
In short, the fringe cost including stamp duty registration, service taxes, TDS etc should be within a reasonable limit with a cap of 5 percent over and above the transaction value (compared to the 19 percent today), to revitalise the real estate industry and bring back retail transactions in the market. This along with an additional deduction and tax savings will prove beneficial to all the stakeholders i.e the retail buyers, the government institutions, the financial institutions and to the developers.