GST in Real Estate: Is one sector and one tax possible?

Ahead of the GST Council’s meeting on November 9 and 10, subsuming all real estate related taxes under GST is a major talking point. Here is a look at the nitty gritty of the same

NEW DELHI: The real estate sector is expected to feature in the November 9, 2017 GST meet. The government has been hinting that the sector can be considered to be brought under GST. Then all individual taxes would be subsumed into the GST. Or will it?

Practically, can all central, state and local taxes on real estate be subsumed into GST? The finance minister has implied that it can be considered and is expected to one of the major talking points in GST Council’s meeting on November 9 and 10. Real estate is unique because it is an immovable asset and is also bound by state laws.

What is Goods & Services: Under the Central Goods and Services Tax Act, 2017 (CGST Act), goods and services have been defined as:

  • Goods: Section 2(52) of the CGST Act: “Goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of land which are agreed to be severed before supply or under a contract of supply;
  • Services: Defined under section 2 (102) “services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged
  • Schedule III of the CGST Act which states the activities or transactions which shall be treated neither as a supply of goods nor a supply of services includes “Sale of land and Sale of building”(except under-construction buildings which are deemed as supply of service) at Sr. no 5 of this Schedule.

Immovable asset

In real estate, since land is an immovable asset, the industry has been given a 33 per cent abatement on the 18 per cent GST. Therefore, the effective charge on the sector is now 12 per cent as against the listed 18 per cent. During the period of construction, when the developer collects money from the consumers, pays different vendors and service providers and gets the asset constructed, the under construction product is considered a service and therefore, comes under the purview of GST. It also gets input credit from many of the 267 allied industries. Once the input credit starts flowing in there would be clarity on how much the prices can drop by.

Anuj Puri, Chairman, Anarock Property Consultants Pvt Ltd, estimates that the quantum of input credit should come to roughly 2-3 per cent. Therefore, the effective GST impact should be 9-10 per cent. As it stands today, ongoing projects are in different stages of completion and the input credit may not all come back to the developer. However, if developers don’t pass on the input credit benefit to customers, it can be construed as profiteering.

GST can’t be applicable to land as it is an immovable asset and that is why there is an abatement of land value provided to developers in the GST on real estate. There is no GST levied on completed projects which are again considered immovable assets.

Sudip Mullick, Partner, Khaitan & Co says, “The Schedule III note implies that sale of land or buildings are neither goods nor services. If the Government decides to include land and building under GST, firstly, they will have to delete the entry from Schedule III and bring it under Schedule II which deals with activities which can be treated as goods or services.”

Other taxes like stamp duty and property taxes are local taxes and there is as yet no means of subsuming them. If the government decides to include real estate in GST then there has to be a way of compensating the states for this loss of revenue. With 12 per cent GST, 6 per cent stamp duty, 1 per cent land under construction, a labour cess and various other taxes, currently, the sector is already burdened with many invisible taxes. If all of them are subsumed into GST then the rate will have to go up.

Inflationary pressure

Niranjan Hiranandani, President Naredco (National Real Estate Development Council), says that GST has put inflationary pressure of 3.5 per cent on affordable and 5.5 per cent on ongoing luxury housing. “The underlying principle of GST was to keep it revenue neutral.” There are 31 or 32 taxes on affordable housing. No country in the world has such high taxation on affordable housing. He suggests that there should be no tax at all on affordable housing till 2022. Let industry get the input credits so that it becomes profitable and there is ample stock in five years to rationalize rates.

Hiranandani maintains that bringing real estate under GST will make the sector more transparent and hidden charges will come to the forefront.

Current tax rates

Getamber Anand, Chairman, Confederation of Real Estate Associations of India (Credai), estimates that taxes account for 10 per cent of the cost of real estate. Hiranandani says “About a third of the cost of housing can be attributed to taxation.” PWC estimates the tax burden @18 per cent. Essentially, the taxes are so many and varied across states, that one figure is difficult to compute today. Naredco has made a comprehensive list of taxes that are applicable to the sector. (see Box)

Stamp duty

Can stamp duties be subsumed in GST? It is a state tax and the total tax amount comes solely to the state. GST is a central tax and needs to be shared with the Centre. If this issue is discussed at the GST council meeting in Kolkata, then there has to be consensus among the states. Past High Court orders on stamp duty also need to be revisited.

Advantages

If GST is applied on land and immovable property, the buyer has to pay one tax at uniform rate across states (eg stamp duty varies state wise).

The industry benefits in the long run, if the timing is right. Prajakta Menezes, Principal Associate, Khaitan & Co says, “In the short term this sector is already grappling due to demonetization (purchases were deferred by buyers), RERA and GST. One more amendment may aggravate the shock in the short term.”

Implemented efficiently and effectively, one GST for real estate across the country is the way to go. How the states will agree to this and what changes have to be made to compensate them for loss of revenue remain subjects of debate. However, both, the industry and the consumer, seem to be beneficiaries of a more transparent way of taxation

Government to discuss bringing real estate under GST in November

HIGHLIGHTS

  • Arun Jaitley has said the matter of bringing real estate under GST will be discussed in the next GST council meet
  • He also said there is a strong case to bring real estate into the GST
  • He was speaking on India’s tax reforms at Harvard University
WASHINGTON: The issue of bringing real estate under the GST’s ambit will be discussed next month, Finance Minister Arun Jaitley said today, as he acknowledged that it is the one sector where maximum amount of tax evasion and cash generation takes place.

The matter will be discussed in the next meeting of the GST Council to be held on November 9+ in Guwahati, Jaitley said while delivering the ‘Annual Mahindra Lecture’ on India’s tax reforms at the prestigious Harvard University.

“The one sector in India where maximum amount of tax evasion and cash generation takes place and which is still outside the GST is real estate+ . Some of the states have been pressing for it. I personally believe that there is a strong case to bring real estate into the GST,” Jaitley said.

The Goods and Services Tax (GST) was implemented from July 1 this year. It brings the economy under a uniform tax regime.

“In the next meeting itself, we are addressing one of the problem areas or at least (having) discussion (on) it. Some states want, some do not. There are two views. Therefore, by discussion, we would try to reach one view,” he said.

The move would benefit the consumers who will only have to pay one “final tax” on the whole product, Jaitley said.

“As a result, the final tax paid on the whole product in the GST would almost be negligible,” the minister said.

Jaitley said the reduction in eventual expenditure coupled with incentivising people to enter the tax net may also help reduce the size of “shadow economy”.

A 12 per cent GST is levied on construction of a complex, building, civil structure or intended for sale to a buyer, wholly or partly. However, land and other immovable property have been exempted from the GST.

On demonetisation, Jaitley said it was a “fundamental reform” which was necessary to transform India into a more tax-compliant society.

“If you see the long-term impact of it, demonetisation brought in more digitised transactions; it brought the issue to the centerstage. It expanded the individual tax base. It compressed the cash currency by three per cent which was operating in the market.

“Those objectives are for the long-term. No doubt there are short-term challenges, but (necessary) for transforming India from a non-compliant to a more compliant society,” he said.

The finance minister said India had historically been one of the least efficient tax system in the world with an extremely small tax base.

“Frankly, over the last several decades, serious efforts, real efforts to expand this base had not been made. You had marginal efforts,” he said, adding that systematic efforts to challenge the “shadow economy” were made only recently.

“In the last few years, the bulk of the increase in tax payers has not been in terms of number of companies but individuals who are coming into the tax net,” he said.

Jaitley said some people had “misunderstood” the objective of demonetisation “which wasn’t to confiscate somebody’s currency”.

“Obviously if somebody has currency and deposits in the bank, it does not become lawful holding. They still have to account for it. Therefore, the anonymity which was attached to a cash currency came to an end and that holding got identified.

“The government was able to trace out about 1.8 million people whose deposits are disproportionate to their normal incomes. And they are all answerable to the law and pay their taxes,” he said.

Jaitley is on a week-long stay in the US, during which he will participate in annual meetings of the IMFand the World Bank.

The Indian real estate market is expected to touch $180 billion by 2020. The housing sector alone contributes 5-6 per cent to the country’s Gross Domestic Product (GDP), according to India Brand Equity Foundation, a Trust established by the Department of Commerce, Ministry of Commerce and Industry.

Construction at Kotur Gardens Kotturpuram Chennai

Construction at Kotur Gardens Chennai

Ongoing Construction at Kotur Gardens Kotturpuram Chennai. Project done by 360 Property Management Construction Division. +91 44 4212 0133

Real Estate Act Comes Into Force. How It Will Protect Homebuyers

New rules under RERA or the Real Estate (Regulation and Development) Act are applicable to residential and commercial development. Under RERA, realty developers and agents have to register with respective state regulatory authorities

New rules under RERA or the Real Estate (Regulation and Development) Act to regulate the real estate sector, protect home buyers and ensure the timely execution of projects with an aim to boost investor confidence and stamp out illegal practices will apply from today. They are applicable to residential and commercial development and make it mandatory for all projects and brokers to be registered with the real estate regulator who will oversee transactions and settle disputes. Only seven states have, however, moved to implement the new rules as yet.
Here’s your 10-point cheat-sheet:
  1. RERA is a model law, which means the Centre can recommend it but it is up to the states to formulate and pass their own laws, since land is a state subject.
  2. Till last weekend, only six states had notified the rules – Uttar Pradesh, Gujarat, Odisha, Andhra Pradesh, Maharashtra, Madhya Pradesh and Bihar. The Housing Ministry had last year notified the rules for the five Union Territories and for the National Capital Region of Delhi.
  3. The Centre has described RERA as the beginning of a new era where the consumer will be king. Union housing minister Venkaiah Naidu said rights and obligations of buyers, developers and real estate agents are clearly defined in the Act and any aggrieved party can seek redressal for violation of terms of agreement by the other party.
  4. On reports that some states have diluted key provisions of RERA, Mr Naidu said that the states have assured his ministry that these will be corrected.
  5. Under RERA, real estate developers and agents have to register with their respective state regulatory authorities by July 30. They must also deposit 70 per cent of the funds collected from buyers in a separate bank account to be used only for the construction of the project, to ensure timely development. New projects must have all approvals before launch.
  6. Promoters must have the consent of two-thirds of the buyers in a project before making any change in the number of units or other structural changes. RERA prescribes penalties, including imprisonment on developers who delay projects or do not deliver on promises. Developers are required to disclose their project details on the real estate regulator’s website, and provide updates on construction progress.
  7. RERA also states that any structural or workmanship defects brought to the notice of a promoter within a period of five years from the date of handing over possession must be rectified by the promoter. For delayed possession, developers need to pay an interest rate of 2 percentage points above State Bank of India’s lending rate.
  8. RERA also prescribes imprisonment of up to three years for errant developers. A developer can sell only on the basis of carpet area which will help home buyers understand what they will be paying for each square foot they will get for use.
  9. In the last few years, sluggish economic growth and delays in getting approvals stalled several projects, leaving buyers waiting for their homes and developers holding high debts. It also put a strain on investors such as banks, private equity firms and non-banking financial companies.
  10. Analysts say the real estate sector will be able to attract higher institutional funding as the Act will bring in much desired transparency in the sector, which contributes about 9 percent of India’s gross domestic product, boosting buyer confidence.

Source : NDTV

out-of-the box developments in the real estate industry

Flex it!

Homes that can transform as per the requirements of its owners might have seemed like a dream up until a few years back. But with the concept of flexi-homes catching up that is no longer the case.

Cities are expanding at an unprecedented rate by the day.

But surprisingly, spaces seem to be shrinking. To address this growing concern, there have been a number of out-of-the box developments in the real estate industry over the years. And the concept of flexi-homes seems to be the top contender in the race.

Like the name suggests, flexi-homes are homes that provide innovatively designed living spaces which enable home owners to alter and customise internal layouts like floor plans, sizes of rooms and other architectural elements, depending on their needs. According to Siddhart Goel, senior director, research services, India, Cushman & Wakefield, the trend has caught on in India and is likely to grow in the future. “Earlier, customers hardly had a say when it came to home buying. They had to accept the designs offered by the builders and after possession and customise their homes at additional costs. These costs would often mount up to quite a lot and would also take up months of their time, plus the added inconvenience. The advent of flexi-homes helps them save on both these elements,” he says.

For developers who offer such projects, this is a win-win scenario since a niche segment like this not only helps them stay ahead of their counterparts but also brings in more customers, especially from the HNI segment where customers give high priority to the options available to them in terms of how they want their house to be. Flexible interiors use both architectural elements as well as innovative furniture to incorporate multiple uses. Spaces that can extend like a collapsible wall that make extra room when you have company over or bed rooms that double up during the day, flexi-homes are catering to home buyers seeking living spaces to suit specific spatial needs, together with the right ticket size, social infrastructure, connectivity and amenities.

“Evolving customers are interested in adaptable homes that can meet changing spatial and privacy requirements over time while repurposing spaces to suit multiple utilitarian requirements. For this, homes need to be designed smartly so as to use all available area efficiently. At the same time, interiors, including furniture, should be planned intelligently, in order to facilitate flexibility and utility within smaller unit areas,” says Vivek Sharma, business head, Mahindra World City, Chennai.

Expandable homes have the advantage that the customer is able to invest in spaces in the preferred residential communities of their choice and later, according to future requirements, add to the existing layout. “The construction plans of such homes are required to provide, in advance, the specific structural details and specifications needed to easily accommodate subsequent additions with the least amount of disruption to daily family activities and limited retrofitting of the existing building,” adds Sharma.

For the home owner, these flexi options have given the word ‘space’ a new meaning altogether. One that can be altered and transformed whenever required and often in a matter of minutes. “Investing in a home is a big step. It will definitely make a big difference in buying trends if even a compact residential unit can meet multiple needs. Young families usually do not need a lot of space. But in the future, additional space will become a necessity and having an expandable home eliminates the hassles of selling the existing home and relocating to a larger place,” says Avantika Prabhu, an IT consultant. The concept of both these options together might seem a little farfetched in the current scenario, but with many developers toying with the idea, one can hope that it will soon be a valid option.

Source – Divya Menon, Times Property, The Times of India, Chennai

Rent from residential premises may be exempted from GST | 360 Property Management

Govt seeks powers to levy GST on all rental income

HIGHLIGHTS

  • GST unlikely to be impoised on individuals renting out homes
  • Currently, service tax is levied on rental income from commercial property only
  • GST rate on housing is expected to be pegged at 18%

Rent from residential premises may be exempted from GST.

Rent from residential premises may be exempted from GST.
The government is arming itself with powers to levy goods and services tax (GST) on all rental income but is unlikely to impose the tax on individuals renting out homes. Currently, service tax is levied on rental income from commercial property, but not levied on residential property.

The Central GST (CGST) Bill — one of the four legislations introduced in Parliament — provides that any lease or letting out of the building, including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services.

Waman Parkhi, a senior tax consultant at KPMG, however, said that in the final rules, the government may exempt residential rental income from GST. The government has introduced the bill which will be followed by detailed rules where exceptions and exemptions are likely to be built in, he said. If the existing system of not taxing rental incomes from residential property under service tax has to be continued, then the same provision of exemption has to be introduced in GST too.

“Any law has to be read with the rules. It should not be seen in isolation,” said MS Mani, senior director at Deloitte. He said that at best the government can impose GST on residential property taken on rent by companies, which can then use it as a tax credit. In any case, GST kicks in at Rs 20 lakh and only some residential property fetches that kind of annual rent.
GST, which is likely to be rolled out from July 1, will subsume central excise, service tax and state VAT among other indirect levies on manufactured goods and services. A senior urban development ministry officer clarified that GST will not lead to any additional tax on end-users. He said finance ministry has already accepted it inprinciple.GST rate on housing is expected to be pegged at 18% with a final decision expected to be announced over next few weeks. Developers and tax experts said this rate will be acceptable to all the stakeholders as it will not lead to any increase in the final price of property. CREDAI president Getamber Anand said that at present the levy is around 12% of project cost paid as excise and Vat. In addition, at the time of sale, buyers pay around 6% of the price as service tax and Vat. So, the total net outgo is around 18%.

At present, while levying service tax on constructed house, an abatement of 60% of the total value is allowed to exclude the value of land and other goods such as bricks, cement and other material from the ambit of service tax. But under the new regime, a consultant said, this would not be required.

Affordable housing is exempted from service tax. To pass on current benefits to buyers, Parkhi said that GST on the ready to move-in houses in the affordable segment will have to be pegged at zero. The GST Bill has also clearly defined that the tax will not be levied on sale and purchase of immovable property like land, house and other real estate assets, which are not under construction.

Tax incentive on second home misused, won’t extend it beyond Rs 2 lakh: Govt

Tax incentive on second home misused, won’t extend it beyond Rs 2 lakh: Govt

HIGHLIGHTS

  • The Finance Bill 2017 restricts set-off of loss towards second home against other heads of income up to Rs 2L under Sec 71 of the I-T Act
  • Currently, there is no such limit for set-off of loss from house property, which is mainly the difference between the rental income and interest on home loan

Representative image.

NEW DELHI: Ruling out rollback of the proposal to restrict tax incentive for second home+ to Rs 2 lakh per annum, revenue secretary Hasmukh Adhia on Saturday said there is no point in subsidising purchase of second property by those who have surplus funds.

Moreover, he added that the tax incentive for second home loan borrower is being “virtually misused.”

Citing limited resources, he said it is prudent to subsidize first-time buyer and not the second property owner who is not staying in that but earning income from the second unit.

The Finance Bill 2017+ has restricted set-off of loss towards second home against other heads of income up to Rs 2 lakh under Section 71 of the Income Tax Act.

Under the present dispensation, there is no such limit for set-off of loss from house property, which is mainly the difference between the rental income and interest on home loan. In other words, a buyer could deduct the entire net interest paid on the home loan.

“Government resources are very very limited. The question is should the government be subsidizing first-time home owners who are occupying own house or should the government be subsidising the second acquisition of the property by people who have got surplus money to invest in real estate,” Adhia said while addressing industry representatives here.

He cited an example: “If I have already my own house, I buy a new property by taking a bank loan of Rs 1 crore, the interest on it is Rs 10 lakh per annum and I rent it out to somebody who gives out Rs 3 lakh as rent, the remaining Rs 7 lakh you could offset against your salary income or business income.”

The loss to the government for the second house were almost one third of that, he said, adding that it came to about Rs 3 lakh in addition to Rs 2 lakh advantage.

“So, why should the government bear the cost of second house acquisition, that was the question. We have a lot of people to be given affordable housing, we need to help them out… so the revenue loss was huge and people were virtually misusing it,” he said.The Finance Bill, 2017, proposes to restrict such set-off of house property loss to Rs 2,00,000 per annum only. Balance loss, if any, will be carried forward to be set off against house property income of subsequent 8 years.
Hence, individual tax payers having loss of more than Rs 2,00,000 will now have a higher tax outgo.

 “In line with the international best practices, it is proposed to insert sub-section (3A) in the said section to provide that set-off of loss under the head ‘Income from house property’ against any other head of income shall be restricted to Rs 2 lakh for any assessment year,” the Finance Bill 2017 said.

“However, the unabsorbed loss shall be allowed to be carried forward for set-off in subsequent years in accordance with the existing provisions of the Act.”

Timesofindia

Infra status to boost low cost housing – Budget 2017

Builders will be eligible for tax and subsidy incentives, and institutional funding at affordable rates.

Union Finance Minister Arun Jaitley, in the Budget 2017-18, has proposed to grant ‘affordable housing’ the coveted infrastructure status to facilitate higher investment in the sector and, in turn, achieve the government’s ambitious goal of ‘Housing for All’.

The grant of infrastructure status would mean builders will be eligible for many government tax and subsidy incentives, and institutional funding at affordable rates for low cost homes.

The move has evoked mixed response from the sector. Tushad Dubash, Director, Duville Estates, said, “With the infrastructure status, the sector can look at funding through insurance companies, which is a huge alternate sector and opens up a new avenue for real estate funding.”

Issue of land cost

However, Rohit Gera, Managing Director, Gera Developments & Vice President, Confederation of Real Estate Developers’ Associations of India (Pune) said, “The infrastructure status will truly see a big impact only if these lower cost funds are actually made available for acquisition of land. Without this, a large part of the funds required for the affordable segment for the construction will be provided by the end consumer. Large scale capital is not required once the land acquisition is completed and approvals are in place.”

Pointing out that in his Budget proposals last year, he had announced a scheme for profit-linked income tax exemption for promoters of affordable housing scheme and that it had received a good response, Mr Jaitley said he intended to make this scheme more attractive.

In a bid to boost affordable housing, the Budget 2017-18 proposed to ease the condition of period of completion of the projects from current three years after commencement to five years. Besides, measurement norm of affordable housing has been amended to carpet area from built-up area — a move that will expand the area and make more projects eligible.

The Budget also proposes to modify the affordable housing scheme by stating that “instead of built up area of 30 and 60 sq.mtr., the carpet area of 30 and 60 sq.mtr. will be counted. Also the 30 sq.mtr. limit will apply only in case of municipal limits of four metropolitan cities, while for the rest of the country including in the peripheral areas of metros, limit of 60 sq.mtr. will apply.

Refinancing loans

The National Housing Bank will refinance individual housing loans of about ₹20,000 crore in 2017-18, Mr Jaitley said. He added, “Thanks to the surplus liquidity created by demonetisation, banks have already started reducing their lending rates, including those for housing. In addition, interest subvention for housing loans has also been announced by the Prime Minister.”

There are also tax sops for developers struggling with completed but unsold homes, estimated at around six lakh units in eight major cities. “At present, the houses which are unoccupied after getting completion certificates are subjected to tax on notional rental income. For builders for whom constructed buildings are stock-in-trade, I propose to apply this rule only after one year of the end of the year in which completion certificate is received so that they get some breathing time for liquidating their inventory,” Mr Jaitley said. He also proposed to make several changes in the capital gain taxation provisions in respect of land and building. “The holding period for considering gain from immovable property to be long term is three years now. This is proposed to be reduced to two years,” the Finance Minister said.

“Also, the base year for indexation is proposed to be shifted from April 1, 1981 to April 1, 2001 for all classes of assets including immovable property. This move will significantly reduce the capital gain tax liability while encouraging the mobility of assets,” he added.

The Hindu 

Top 10 expectations of real estate sector from Budget 2017

Developers have for long been demanding single window clearance to remove bureaucratic delays, which in turn delay delivery of homes.
Developers have for long been demanding single window clearance to remove bureaucratic delays, which in turn d… Read More
 Real estate industry has high expectation from the upcoming budget 2016-17. Stakeholders are demanding that central government gives relaxation in income tax rate, provide clarity on GST, raise House Rent Allowance (HRA) deduction and announce policies to standardize construction materials in order to uplift the real estate industry.

Take a look at some of the major expectations that stakeholders have from the upcoming Budget 2016-17:

Industry status
Directly or indirectly, the real estate sector contributes to over 15% of India’s GDP. It has been asking for industry status for quite some time now. In its absence, developers are forced to borrow at high interest rates and comply with a stringent evaluation process. Unavailability of funds at a reasonable rate of interest delays the construction process and increases the final cost of homes, negatively impacting the end consumer.

Giving industry status to the entire real estate sector, instead of granting infrastructure status only to the affordable housing segment, would help in pushing the housing demand in India.

Single window clearance
For the real estate sector to really grow and execute its projects on time, various government approvals should be given in a timely manner. Developers have for long been demanding single window clearance to remove bureaucratic delays, which in turn delay delivery of homes.

Clarity on beneficiaries under PMAY
The government recently announced that interest rates of 3% would be applicable on loans of up to Rs. 12 lakh and 4% on loans of up to Rs 9 lakh, under the Pradhan Mantri Awas Yojana (PMAY). Now, two new income categories can avail higher loans with interest subsidies. The Budget should give more clarity on the actual definition of beneficiaries who can avail of these benefits.

For example – would young urban professionals hoping to buy their own apartments but not belonging to either the EWS (Economically Weaker Section) or the LIG (Low Income Group) segments be allowed similar subventions? Also, affordable housing is largely available in the fringe areas of metros and tier-II, III cities. Would certain redevelopment projects within metros meeting the affordable housing definition be granted similar benefits?

Financial protection from project delays
The deduction on interest of self-occupied houses is capped at Rs 2 lakh. For under construction residential units, however, if the construction is completed after 3 years, then the deduction is just Rs 30,000. This 3-year period starts from the end of the year in which the loan was taken. Lately, there have been many delays in the completion of many housing projects beyond the 3-year period.

This has caused hardships to property buyers. To provide them some relief, the government may consider allowing interest deduction in such cases without the cap of Rs. 30,000, and from the year in which the possession was due to the buyer as per the terms of the agreement.

I-T sops for first-time home buyers
Can a first-time home buyer looking at an affordable project get additional income tax incentives for at least five years? The Budget should throw more light on this. Any efforts in this direction would help the government move closer to its objective of delivering ‘Housing for All by 2022’.

Also, given the lack of institutionalized rental housing in Indian cities, such a move could spur many fence-sitters into moving out from their rented apartments to owned homes. It could also encourage more developers to come up with products suiting these segments.

Simplified tax norms for REITs
We have not seen a single REIT listing till date because of the presence of multiple taxes. Until tax hurdles are removed for developers and asset holders, it is highly unlikely that we will see any REIT listing. The government should recognize the capacity of REITs to improve market conditions for the real estate sector and remove the policies constraining their growth. The government should look at:

Reduced level of taxation of REIT income
Waiver of capital gains for the developer at the time of transfer of property into REIT
Removal of service tax on lease premises

Higher tax saving on home loan & home insurance premiums
The government should increase the tax deduction limit for housing loans, especially for buyers in metropolitan cities. The current limit of Rs 2 lakh is insignificant, given the ticket sizes in cities like Mumbai where most houses are priced at Rs 1 crore and above. Also, tax concessions on house insurance premiums could be introduced to encourage end-users to insure their homes.

Similarly, the tax exemption limit should be increased by about Rs 1 lakh and be auto-set to match inflationary trends in a financial year.

Clarity on GST

While the goods and services tax (GST) tax structure has been announced, the real estate industry is waiting with bated breath to see which tax rate is applied to the real estate and construction industry. Clarification would also be needed on the abatement scheme, and whether credit for input tax would be allowed if the composition scheme has been availed by developers.

Raise house rent deduction limit

Salaried persons get house rent allowance (HRA) as a component of their total salary, and can therefore claim a deduction. This deduction can be substantial in cases where the salary and its HRA component are higher. However, self-employed persons and those who draw lump sum pays without an HRA component can only claim a maximum deduction of Rs 2,000 a month under Section 80GG. The Budget can and should address this anomaly.

Digitize all land records

Digitize all land records and registration process to make them easy to do and transparent.

TimesofIndia