Pune to ben­e­fit from ex­emp­tion for 60 sq m units

HT Estates - - HTESTATES - Pankaj Kapoor

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

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