Does Budget Hang on to expectations of property Buyers?

The Government boasts of fastening its seat belt to push reforms in real estate sector. Buoyed by the continuous success in property developments, most builders in India found themselves unable to resist the temptation to develop more and more, whether legal or illegal. This has encouraged a need for the government to take steps to protect consumer rights.

The finance minister has unveiled a new budget, which includes some provisions as well as some restrictions for Indian real estate sector. The article sheds light on what the general public had actually expected from the budget, and that has not been incorporated at all.

• Section 80IB of the Income Tax Act should continue in favor of real estate developers.
According to this section, builders have been given some tax relief regarding construction of units, which are less than 1000 square feet built up in metros. However, the act is no more applicable and has come to an end. A number of property developers have built residential segment under this scheme and consumers are benefited through the mass construction.

As such, they were property developers and not the consumers who were making killing on such property deals. Not all the homebuyers are cognizant of such a tax respite, which the government had given to the real estate developers.

The tax relief was serving as a savior for the middle class homebuyers. For that reason, the government should continue with offering this subsidy to developer. Moreover, the act will also support the 10th plan estimate of the government where the scarcity of accommodation units is likely to shoot up to 22.4 million square feet.

• Exemption Limit under Section 24 should be increased
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The exemption of the interest on home loan in India should be increased from the current Rs1.5 lakh to the minimum of Rs. 3 lakh. The price of the apartments has gone through the roof in the past few years. Keeping the same in concern, it is suggested to bring a hike in the rate of interest. Also, the benefit of tax should be made effective from the date of booking of the property and not from the possession.
• Tax Deduction at Source should be relaxed.

TDS on housing rental earnings for homeowners is 16.83%, which should be decreased to 10% especially for Non Resident Indians home loans. A first slab of 15% should be considered on rental income for NRIs, as this is the only income they have against their property. The move will put both demand and supply on fast track as both licensor and licensee will see more incentives coming their way.
• Property buyers should not be levied any service tax.

A number of property developers are charging clients service tax. Though, the builders are apparently instructed to pay service taxes in case they hire any outside contractor to develop the units. The homebuyers should not be asked to pay any service tax as they are already paying stamp duty on their property buys.

Stamp duty charges should be brought down.
Stamp duty should be brought down from current 5% to 2.5% as this will make the transaction easier for the consumers and they will try to opt for more real estate deals, which will further give a push to revenue for the government.

In addition, what the government has included and which has shattered expectations of the common man is as follows:

The bulk of the commercial space has been taken up by the outsourcing companies who are developing shops. As it is, the rental incomes have gone up considerably. Moreover, there is a 12% service tax and there is a 3% add-on so it is 12.36% - give and take 15% rental cost, will increase which is going to hurt because these BPOs do work on small margins.

Another concern is about the cement price increase, Rs.12 a bag, will pass on to the Developers. Ultimately the customer pays for it, so what is an anti-inflationary measure becomes an inflationary measure.

The budget has just not touched the Special Economic Zones sector (SEZs). Some people were anxious; indeed, IT companies will look at SEZ more because that's the only place where there is no MAT for SEZs for IT companies.

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