Expectations Of Real Estate Sector From Budget 2016-17

CREDAI expects concrete measures in the Union Budget 2016-17 to achieve the goal of Housing for All by 2022 such as the following:

Robust and uniform definition of affordable housing
The definition of affordable housing must reflect the totality of the vision of housing for all. In CREDAI's view, restricting the definition of affordable housing to 25 square meters or 40 square meters amounts to scuttling of the vision. The Budget would do well to adopt a uniform definition of affordable housing comprising dwelling units with carpet area up to 90 square meters in non-metros and up to 60 square meters in metros.

Tax relief to individuals for home ownership
Present limit for deduction of interest under section 24(b) is Rs 200,000 for self-occupied property and present limit for deduction under section 80C is Rs 100,000 need to be revised to a composite limit of Rs 6 lakh for both principal and interest. Section 24 of the Income Tax Act, allows for tax deduction on payment of interest. However, the proviso in the section states that if the property if not acquired or constructed within 3 years from the end of the financial year in which capital was borrowed when the loan was taken, the deduction of Rs 2 lakh would not be available. This is a restrictive provision that curtails the flow of benefit under the Section. Delays on account of approvals and other procedural impediments, warrant that the time period be extended from 3 to minimum of 5 years.

Benefit under Section 80 IA B to affordable housing
Section 80 IB allows deduction of profits from infrastructure undertakings from the total income. Affordable housing is considered infrastructure internationally because affordable housing projects include roads, sewer, drainage, lighting, greens and other utilities which are in their character and impact are absolutely infrastructural.

Capital gains on affordable housing
Section 54F provides that capital gains are exempt from tax if invested in construction of a house within three years which is unreasonable given long approval processes. Limit of 5 years would be more reasonable.

Removal of tax anomalies
A number of anomalies in Income Tax law are inhibiting investments into housing sector. Some of the prominent ones which Union Budget 2016-17 may remove are as follows:

1. Under Section 43CA property transactions are being taxed at the guideline values where as the market price is much lower.

2. Joint Development Agreements are being taxed as though income accrues at the time the agreement is entered into. Budget is expected to remove these anomalies.

3. Under Section 22 applicable to taxation of house property on the basis of Annual Letting Value, property which is held as inventory by developers is also being taxed.