Among other demands, developers also want a one-time roll over or restructuring of loans taken by developers
In the run-up to the Union Budget next month, the real estate sector wants Finance Minister Nirmala Sitharaman to consider housing loans up to Rs 1 crore under 'priority sector' lending. It also wants lending rates below 7 percent.
Real estate developers have also recommended a one-time roll over or restructuring of loans taken by them.On affordable housing
“We have recommended that housing loans up to Rs 1 crore may be counted towards priority sector and interest rates to be below 7 percent effectively,” CREDAI said in a recommendation note.
The developers’ body has also sought some changes in the definition of affordable housing. “The following definition may be made universally applicable across all government agencies. Affordable housing comprises units with a carpet area as defined under RERA that do not exceed 60 square meters in the metros and 90 sq m elsewhere,” it said in its note.
It has also proposed that the benefit under Section 80IBA should be extended to all affordable housing projects as long as the size of the residential units satisfy the limits on carpet area of the units at 30 sq m, where the project is located within the cities of Chennai, Delhi, Kolkata or Mumbai or 60 sq m, where the project is located in any other place.One time rollover of loans
In its circular dated June 2019, RBI permitted banks to restructure and/or roll over loans at their option. In such cases, the borrower will retain the asset classification of the restructured accounts as standard and the same will not be treated as a non-performing asset (NPA).
But the benefit of the said circular has not been made available to the real estate sector and as a result the restructuring or roll over of the loans to the real estate sector triggers the provisions related to NPA. Due to the downturn in the market and also failures of several big non-banking financial companies (NBFCs), the developers are facing acute liquidity shortage, NAREDCO said in its recommendations submitted to the finance minister.
“We recommend that the banks and financial institutions be given discretion for a one-time restructuring and/or roll over of their existing loans on the lines of loans to other sectors. For this purpose, RBI should issue a circular on the lines of similar circular issued on December 8, 2008,” it said.Deduction of interest on home loans
With regard to deduction of interest on home loans, CREDAI said buyers are allowed to avail of the same for acquisition of a house. “However, the deduction is allowed only on loans sanctioned between April 1, 2016 and March 31, 2017 and the amount should not exceed Rs 50,000,” it noted.
This time for the loan should be extended to March 31, 2022 in line with Housing for All by 2022 and that 100 percent interest on home loan be allowed as deduction for the first home of individuals, the builders’ body has proposed.
It also wants 100 percent deduction on home loan interest be allowed as deduction for second and third homes provided that the others are rented for a period of nine months during the year. This measure is being suggested to boost rental housing.
CREDAI wants the benefit under Section 80IBA be extended to all affordable housing projects as long as the size of the residential units satisfy the limits on carpet area.On input tax creditIt has proposed that the benefit of input tax credit (ITC) be restored to real estate by charging GST at 12 percent with allowance for land cost at 33 percent on par with the current rate of contract works for government projects.
With regard to GST, NAREDCO has proposed to the finance ministry that ITC be granted in respect of tax paid on acquisition and construction costs of commercial leased properties and that be allowed to be set off against the tax on lease rent.
Under GST Act, the leasing of the commercial properties are subjected to tax at the rate of 18 percent of the rent amount. ITC in respect of tax on acquisition or construction of said property is not allowed to be set off against the tax payable on output service. As a result the effective cost to customer lessee increases as the acquisition /construction cost goes by 18 to 22 percent making the properties uneconomical to rent.“As a substantial portion of commercial properties are leased by the foreign investors and/or foreign offshore units, who have benefit of sourcing such services from other countries, they opt to base their operations in other places. We recommend that ITC be granted in respect of tax paid on acquisition and construction costs of such leased properties and allowed to be set off against the tax on lease rent,” NAREDCO said.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.