Industry StatusBeing the largest employment generator after agriculture in India, there is a definite case for recognizing the real estate sector as an industry. At a time when real estate sector is facing liquidity crunch, this move would make financing easy from the bank in this highly capital driven sector. Also opportunities for external borrowing would become easier for the sector.
More...
Industry Status
ReplyDeleteBeing the largest employment generator after agriculture in India, there is a definite case for recognizing the real estate sector as an industry. At a time when real estate sector is facing liquidity crunch, this move would make financing easy from the bank in this highly capital driven sector. Also opportunities for external borrowing would become easier for the sector.
Tax Holiday for housing projects- Section 80IB(10)
In order to support developers’ efforts of promoting LIG/MIG housing projects there is an immediate need for a tax holiday to make LIG/MIG housing a more realistic proposition. For the same, the Cut-off date for eligibility should be further extended and Tax holiday eligibility, based on project completion condition should be restored.
High land and construction costs driven by input costs are making affordable housing projects unviable in the vicinity of developed cities. Developers need the incentive under the 80IB scheme to invest in affordable housing projects which would in turn drive urban development, and support steel, cement, and other construction-related industries, says the memorandum.
The cut-off date for eligibility should also be extended to increase supply of affordable housing units. The projects approved before March 31, 2007, face a deadline to complete by March 31, 2011. Due to the slowdown in 2008 the projects sanctioned prior to March 2008 should be given a four-year deadline.
We would also like to request the Government for infrastructure status for integrated township development. Like other infrastructure projects, township projects too have a long gestation period and are capital intensive.
External Commercial Borrowing should be permitted
External commercial borrowing (ECB) should be permitted for funding construction costs of real-estate projects which qualify for 100 per cent FDI under Press Note 2. As of now, ECBs are not allowed for real estate due to end-use restrictions and alternative sources for construction finance from banks are expensive.
Tax Deduction to first time home buyers
ReplyDeleteReal estate prices in India have sky rocketed over the last one year, it has become all the more important to give certain tax benefits to individual tax payer. United States also had similar schemes called First time home buyers tax credit (FTHTC). We would suggest that certain tax breaks from personal taxes for first time home buyers and low income group to promote housing sector.
Exemption from Section 56(2) of the Act relating to payment of stamp duty is needed. It points out that apartment purchase agreements are signed even before the construction commences. But the conveyance is done after project completion which could be 3-4 years down the line when value could be higher. The difference in value of stamp duty and the purchase price is booked as income in the hands of the buyers.
Another concession relates to deduction for principal repayment of housing loans under Section 80C. In addition to the Rs 1 lakh deduction, we are requesting government for an additional Rs 2 lakh deduction for self-occupied residential property.
Service Tax- Real Estate
As a matter of practice and in order to fund the construction costs, most of the agreements are entered with the buyers at the time of initiation of a project with milestone linked installements. We would suggest that service tax should not be levied on apartments and houses under construction as the transaction between property developers and the purchaser, is for selling of immovable property including land component. It is pertinent to note that the aforesaid transaction suffers Stamp Duty payable to respective State Government as “land” is covered under the State’s subject in the Indian Constitution. Some states in India permit registration of property (land and construction component separately) during construction stage as well as post completion of construction. In such States, VAT is being demanded on construction component only by the state government. Accordingly, simply because certain states follow the above procedure it is unfair on the part of Central Government to levy Service Tax by treating the Developers as Contractors. Hence to mitigate the hardship to the end consumer who is over burdened with double taxation a relook on this aspect will go a long way.
Cement and Bricks as “Declared Goods”
In order to make affordable housing realty, it is recommended that like steel, cement and bricks should be included in the list of “Declared Goods”