The much awaited Union Budget 2023 -24 is all set to be presented in a few days. Real Estate Sector , the second highest employment generating sector has expectations from the Govt so that the sector can operate in the wake of inflationary pressure , monetary tightening global recession and the ongoig Russia – Ukraine war.
Shri Sushil Mohta, President. CREDAI WEST BENAL and a founder member of CREDAI NATIONAL, Chairman-Merlin Group on behalf of industry explained some key hi lights on the basis of recommendations submitted by Credai -National for the forthcoming union budget.
“Affordable Housing is one of the key segments of the residential market in India. Kolkata is one of the key affordable housing markets. As per definition, the carpet area of Affordable Housing is 60 sq mts in metro cities and 90 sq metres in non metro cities., but within the price bracket of Rs.45 lakhs, of the value of Residential Unit. The said value was set 5/6 years back. The cost of developments goes up 8 to 10% on yearly basis, As such, We have requested the same to be should raised to 75 lakhs (for non- metro cities)/ INR 1.50 Crore (for metro cities))
Interest as deduction for Home Buyers: Increase in limit
Present limit for deduction of interest against “Rental income” under section 24(b) is INR 200,000 for self-occupied property. However Home-buyers lose the benefit of interest claim over INR 200,000 despite actual payment of the interest
- It is suggested that, in case of individuals, the interest in respect of first self-occupied property should be allowed without any limit.
- Alternatively, the limit for deduction of interest should be increased to INR 5,00,000 in respect of the self-occupied property
Increase in interest deduction will encourage the home-buyers to invest in the real estate and increase the demand in the market with all round multiplier effects.
Long Term Capital Gains from Real Estate
Long Term Capital gains on capital assets are taxed at the rate of 20% and the holding period for eligibility is 24 months . Present rate of tax at 20% is too high and the holding period of 24 months is too long for the section to have any promotional benefit .
Long term capital gains on capital assets should be taxed at 10% and the holding period should be reduced to 12 months. Capital gains on Sale of residential property should be exempted if 50% of the sale realization is invested in more than one residential property .
The arbitrage between the financial assets and real assets will be reduced thereby encouraging investments into the real economy.
Amendment to Section 80C to increase limit for repayment of housing loan principal or alternatively introducing another section for Deduction with respect to principal repayment .
I strongly feel that the ensuing budget should bring some welcome reliefs for tax paying middle class home buyers when it comes to the deduction for principal repayment of Housing Loan / Cost of first Self Occupied House Property under Section 80C.
At present , The ceiling of deduction for principal repayment of housing loan is INR 150,000
Further, the above deduction is clubbed with other tax saving instruments.
According to me, the ceiling of INR 150,000 is insignificant, more so when it is also clubbed with other tax saving instruments . Many assesses are not able to claim the benefit of this deduction to the fullest considering the above limit and other available deductions under section 80 C.
I feel that the deduction under section 80C should be allowed to individuals in respect of the cost of their first self-occupied house property upto INR 5,000,000. The said deduction could be spread over a period of 5 years. Besides deduction under section 80C for principal repayment of housing loan should be increased from existing limit of Rs 1,50,000
If Govt implement these changes , then the Increase in the deduction for principal repayment of housing loan will encourage the home-buyers to invest in homes. Further, Increased housing stock would boost affordability through rental housing.
Increase in interest deduction and Principal repayments will encourage the home-buyers to invest in the real estate and increase the demand in the market.
Such type of amendment will be considered as landmark. This amendment will play an important role in our Hon’ble Prime Ministers dream of “Housing for all by 2022” mission.
Industry status for the real estate sector
While the real estate sector has had many regulatory and procedural changes implemented in recent times, it is still known as an unorganized sector rather than an important nation-building contributor. Being the second-largest contributor to the country’s GDP, it has been a long-standing demand for the real estate sector to be accorded an industry status. This will help in making the sector more organised and improve transparency in the operations of various constituents.