Aid in demand creation

For facilitating the robust economic revival of the industry post-economic aftermath of the pandemic, demand creation should be ensured by introducing tax sops for homebuyers especially since most salaried people buy a home by taking a housing loan and use their income to pay such loan.

Key relaxations for Government’s consideration are:

• Increase in the deduction limit for interest on home loans to Rs 10 lakhs from the current Rs 2 lakhs
• Deduction of the principal amount of housing loan repayment should be allowed as a deduction separately and should not be clubbed with other deductions under section 80C of the Income Tax Act. Alternatively, the limit under section 80C should be increased to Rs 3 lakh.

Ready reckoner/circle rate valuation

The difference of more than 10 percent between the ready reckoner/circle rate and agreement value of property attracts tax penalties under Section 43CA of the Income Tax Act.

• While ready reckoner/circle rates are determined by the government; the actual sale price is dependent on numerous factors like location, amenities, furnished or bare-shell property, bulk or single property transaction, competition; the price is inclusive or exclusive of taxes and prevailing market rates.
• It is submitted that a certificate from a chartered engineer instead of a government valuer is accepted in case of differential up to 20 percent of the ready reckoner/circle rate.

Reduction in holding period of immovable property

To promote the real estate sector and to make it more attractive for investment, the holding period of immovable property for long-term capital gains computation be reduced to a 12-month period from the current 36 months.

Registration costs should be allowed as ITC

Registration costs for the purchase of land are a significant amount for which the developers do not get any benefit. Since developers are unable to claim the input tax credit (ITC), this is a direct cost for them which ultimately raises the cost of ownership for home buyers. The government should introduce a policy permitting registration costs for the purchase of land as an input tax credit.

Exemption of GST on transfer of leasehold rights from local authorities

The leasehold rights given by local authorities are for periods ranging from 60 to 99 years. Transfer of such leasehold rights are in effect transfer of land and/or building itself as the consideration payable for such transfers is equal to the market value of the property. The government should therefore consider issuing a circular clarifying that transfer of lease rights from local authorities (like MIDC, CIDCO MMRDA, GIDC, NOIDA) will be exempt from GST.

Streamline approval process

The Centre should consider bringing about a model code that would simplify the approval process for real estate projects. Currently, developers have to go through innumerable regulations for securing necessary permissions, often overlapping multiple authorities and jurisdictions.

To improve the whole process, the government could bring about a model set of regulations, including set timelines for granting or rejecting applications, an appeal system, and nodal officer as well as guidelines on premiums and development charges, etc. The Central government should encourage states to adopt this model code as it could significantly streamline the approval process and result in homogeneity on a pan-India level.

This article was originally published in Firstspot on 30 January 2022 Written by: Ashoo Gupta, Partner. Click here for original article

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