Pune to benefit from exemption for 60 sq m units
only be accessed after 58 years or retirement, whichever is later.
The government has also decided to introduce a transfer amount enabling provision. What this means is that the amount in EPF can be transferred to the National Pension Scheme. For example, if the corpus is ₹ 1 crore, 40% withdrawal of the corpus will be tax free but interest earned on the remaining 60% may attract a tax under the new proposal. This can prove
to be a deterrent for people wanting to put in their EPF money for real estate.
“Rather than buying real estate, the intention of the government here seems to be to encourage people to move towards buying a pension product,” say tax experts.
According to Sadagopan, while there is no specific data available on the percentage of the population using EPF money to buy real estate or partially withdrawing the money to pay off their home loan, data available states 10% use the corpus for real estate ‘purposes’ and that too during their working life. Very few use the EPF money to buy their first house post retirement. Having said that, “assuming some people do have a loan liability or requirement to buy a property on retirement, they may choose to make use of retirement proceeds from other sources such as gratuity or even dig into the tax free 40% PF corpus rather than dig into the remaining 60% provident fund corpus. But a majority of people will still go in for pension plans rather than real estate.”
The third budget under the NDA government was delivered amidst much anticipation. While it received a tepid response from individuals and corporate sectors, the weaker sections of the society and rural India have quite a lot to cheer about.
The focus of the budget was affordable housing and several reforms rolled out in the budget were in that direction. Under Section 80-IBA, 100% deduction for profits to developers has been proposed for constructing flats of up to 30 sq m in Chennai, Delhi, Kolkata or Mumbai and 60 sq m in other cities, approved during June 2016 to March 2019 and completed in three years. MAT will still be applicable.
The supply of flats of sizes of up to 30 sq m in Chennai, Delhi, Kolkata or Mumbai comprises only approximately 9,000 units, led by the Mumbai Metropolitan Region and the National Capital Region, while the supply of flats of up to 60 sq m in 23 cities in India except the above includes 1,63,722 units in all and constitutes only 25% of their total supply.
Thus, this reform is not likely to have a far-reaching impact. However, Pune is likely to benefit from the service tax exemption of houses of up to 60 sq m since the demand for 1BHK and compact 2BHK units is the highest in this city.
On the other hand, developers in Kolkata will not benefit much from the reform under- lying 100% deduction on profit for flats of up to 30 sq m, as the migrant population in the city is very less and there is muted demand for compact 1BHK and studio apartments.
The author is founder and MD,Liases Foras Real Estate Ratings and Research Pvt Ltd