Team B&C | NT
Ahead of the Union Budget 2020-21, the Confederation of Real Estate Developers Association of India (CREDAI) is called for direct measures for revival of the real estate industry. “The measures taken to stimulate the sector should be a part of the measures to boost GDP growth,” said Satish Magar, the national president of CREDAI.
The trade body’s recommendations include change in the Insolvency and Bankruptcy Code (IBC), income tax laws, GST, change in definition of affordable housing and easing flow of funds to the housing sector.
According to CREDAI, the real estate sector accounting for eight per cent of the Gross Domestic Product (GDP) is also the second largest employer after agriculture. The trends of the post-World War II period indicate that the real estate not only contributed to GDP but also helped in ensuring a better quality of life and promoting equitable distribution of income.
The trade body added that, over the last few years the sector has to cope with institutional changes including RERA, GST and IBC. The fall in the growth of GDP from expected rate of eight per cent to around five per cent has also adversely affected the demand side in real estate. “This is because homes are a part of discretional expenditure by households. Equally, decline in the rate of GDP entails downward adjustment in demand for shops and offices,” pointed
Budget 2020-21 should therefore should provide the government an occasion to boost the real estate demand as also continue to encourage private sector investment particularly in affordable housing, in line with the objective of ‘Housing for All by 2022.’ CREDAI’s suggestions are as follows:
Income Tax: An individual is allowed to avail of deduction of interest on loan for acquisition of a house. However, the deduction is allowed only on loans sanctioned between 1.4.2016 and 31.3.2017 and the amount not exceeding Rs 50,000. The government needs to:
Extend the timeline for the loan to March 31, 2022 in line with Housing for All by 2022.
In case of individuals, 100 per cent interest on home loan be allowed as deduction for first home.
100 per cent interest on home loans to be allowed as deduction for 2nd and 3rd home provided that except self-occupied home, others are rented for a period of nine months during the year. The measure is being suggested to boost rental housing.
Section 43 CA of the Income Tax Act is a barrier to natural price correction and the stalled project has a cascading effect on home buyers, banks and other stakeholders. The rule needs to be removed or amended to exempt primary sales or at least allow sale at 30 per cent below the circle rate.
The following portion of Section 80IBA should be deleted- “Where the approval in respect of a housing project is obtained more than once, the project shall be deemed to have been approved on the date on which the building plan of such housing was first approved by the Competent Authority.’ There should be an exception to this clause to accommodate cases where the construction work has not started after sanction of plan and the developer opts for re-sanction to take up affordable housing.
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 thirty square meters, where the project is located within the cities of Chennai, Delhi, Kolkata or Mumbai or sixty square meters, where the project is located in any other place.
GST: The benefit of ITC be restored by charging GST at 12 per cent with allowance for land cost at 33 per cent on par with current rate of works contract services for government projects. Further, taking into account the output GST being paid on such rentals on commercial leases, the restriction from input tax credit eligibility under section 17(5) (c) and 17(5)(d) of the CGST Act, also be removed.
Definition of Affordable Housing: 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 sixty square metres in the metros and 90 square meters elsewhere.
One Time Restructuring Scheme for Real Estate Projects Liquidity shortage continues to cause distress in real estate. Hence, a one-time restructuring scheme with moratorium on principal and interest of 2 years is immediately needed.
Easing Flow of Funds for Housing: Home loan up to Rs. 1 crore may be counted towards priority sector and interest rates be below seven per cent effectively