Rais­ing ex­emp­tion limit on loans is key

To en­hance af­ford­abil­ity of res­i­den­tial units for home­buy­ers, the Bud­get should in­crease the limit for in­ter­est de­duc­tion on hous­ing loan and lib­er­alise the mul­ti­ple tax­a­tion regime

HT Estates - - FRONT PAGE - Neeraj Bansal

The Bud­get is im­por­tant from the point of view of ex­pec­ta­tions of the stake­hold­ers as well as key com­mer­cial de­ci­sions for the up­com­ing year as both are de­pen­dent on bud­get an­nounce­ments. Here are some ex­pec­ta­tions of de­vel­op­ers and home­buy­ers from this year’s Bud­get both from a tax and reg­u­la­tory per­spec­tive.

Home­buy­ers

Af­ford­abil­ity has been a se­ri­ous con­cern for home­buy­ers. Some of their ex­pec­ta­tions from the Bud­get in­clude: The present limit for in­ter­est de­duc­tion for a hous­ing loan should be in­creased Pay­ment for pur­chase of first house up to a cer­tain limit should be al­lowed as de­duc­tion for a pe­riod of three to five years In­ter­est rate for buy­ers should be re­duced to en­able them to af­ford the cost of a house; The mul­ti­ple levy of tax­a­tion should be elim­i­nated to re­duce over­all cost of a house.

The lib­er­al­i­sa­tion of tax­a­tion and reg­u­la­tory regime as high­lighted above can pro­vide the much-needed boost to the sec­tor as well as help the gov­ern­ment to achieve its vi­sion of Hous­ing for All by 2022.

De­vel­op­ers

With liq­uid­ity crunch pre­vail­ing due to slow mov­ing sales, de­vel­op­ers are fac­ing chal­lenges like high in­ter­est and con­struc­tion cost, un­ex­pected amend­ments in state reg­u­la­tions, etc. The wish­list of de­vel­op­ers, in­ter­alia, in­cludes the fol­low­ing:

From a fund­ing per­spec­tive: In Bud­get- 2014 a favourable tax frame­work was in­tro­duced for REITs. On a macro ba­sis, REITs have been granted a pass-through sta­tus (ie one level tax­a­tion). Though the an­nounce­ments were made to make REIT at­trac­tive from an in­come tax per­spec­tive, fol­low­ing ar­eas need se­ri­ous con­sid­er­a­tion: Levy of div­i­dend dis­tri­bu­tion tax (‘DDT’) on div­i­dend by project spe­cial pur­pose ve­hi­cle (‘SPV’s’) to REIT No cap­i­tal gains ex­emp­tion to a spon­sor on con­tri­bu­tion of i mmove­able prop­erty and de­ferred tax­a­bil­ity on ex­change of shares of SPV with REIT units No stamp duty ex­emp­tion on con­tri­bu­tion of as­sets by spon­sor Ex­ter­nal Com­mer­cial Bor­row­ings norms should be lib­er­alised ir­re­spec­tive of the size of the project, to en­able the real es­tate sec­tor to raise funds at a cheaper rate which would ad­dress the liq­uid­ity crunch. From the di­rect tax per­spec­tive: In the present scheme of tax­a­tion, no tax in­cen­tives are pro­vided to de­vel­op­ers. Some of the key con­cern ar­eas and ex­pec­ta­tions are::

Profit-linked in­cen­tive was avail­able un­der Sec­tion 80-IB of the In­come-tax Act, 1961 (‘the Act’) which was re­placed with in­vest­ment linked in­cen­tives un­der Sec­tion 35AD of the Act. How­ever, the lat­ter is avail­able only to af­ford­able hous­ing and the SRA seg­ment. Con­sid­er­ing the slow­down, re-in­tro­duc­tion of profit-linked in­cen­tive would en­able growth of the sec­tor.

Stamp duty- based deemed

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