The success story of the booming real estate market in India coupled with strong economic growth have spelt good news for the country. Nonetheless, reforms are necessary. Reforming the real estate sector in this budget will add to the success story of the country.
So this budget, the Government should further reform and tighten norms for the real estate sector to protect the interests of the investors. This will encourage the actual homebuyers and NRIs who are looking to invest in India. Certain reforms are needed to ensure housing at affordable prices to appeal to the masses.
The developers and builders in India have been having a field day with no control over built up and carpet areas, illegal property documents and constructions, possession related issues and other illegal entanglements. In Mumbai, rules and regulations for re-development of old buildings and the slum rehabilitation should be made more lucrative for investors and builders.
Our expectations from the budget with respect to the real estate sector are as follows: 1. Section 80 IB of the Income Tax should resume. This act gives tax relief to the builders who construct units less than 1000 square ft built up in metros. However, the benefits under this section have been stalled since last year.
A lot of builders have created houses under this scheme and consumers are benefited through the mass construction. The only problem here is that while the builder gets tax relief there is nothing passed onto the consumer.
A majority of home buyers are unaware of this tax respite which the Government had given to the builders. The Government should continue giving this subsidy to the builders as this will encourage them to make more affordable homes. This will also be in line with the Government's 10th Plan estimate where the shortage of housing units is expected to be in the range of 22.4 million square ft. This benefit is the need of the hour but with some rider that the benefit is mandatorily passed on to the consumer.
2. Under Section 24 of the Income Tax, the exemption of the interest on home loans should go up from the present Rs 1.50 lakh to atleast Rs 3 lakh. This is keeping in mind the average size of the apartment price has grown 200% over the past few years.
Also, the tax benefit should be given from the date of booking of the property and not from the possession.
3.Tax deducted at source (TDS) on housing rental income for individual home owners should be brought down from 16.83% to 10%.
A flat slab of 15% or a tax holiday of initial 3 years should be considered on rental income for NRIs. This will boost NRI investment into the country or else they'll look towards other countries for returns on their investment. Also, this will rationalise the prices of rentals in many metros and more people will be willing to rent out properties.
A lot of NRIs lock up their apartments for fear of an upfront deduction of TDS of more than 30%, which affects return. Further, a standard deduction of 30% towards maintenance should be increased to 40% for local residents and 50% for NRI houses.
4.Stamp duty charges should be reduced to 2.5% from the current 5% as it will benefit the property buyers.
5.The interest given on bonds should be linked to bank interest rates on fixed deposits. This is extremely helpful to elderly in ensuring their safety for future. A lot of property owners still are conservative and prefer to invest their money in capital gain bonds and earn a living out of them.
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The author, Sandeep Sadh is the CEO of Mumbai Property Exchange.com
