CRDAI Demands Tax Relief to Encourage Affordable Housing and Slum Development

With the countdown to the Union Budget having started, the real estate industry body, Confederation of Real Estate Developers’ Association of India (CREDAI), has put forth recommendations on the twin themes of affordable housing and slum redevelopment. According to a press release quoting its President, Santosh Kumar Rungta, President, says, “CREDAI appeals to the government on the impetus to create and facilitate affordable housing. We are optimistic that our recommendations to the Central Government will be evaluated with utmost importance and will put affordable housing’ at the centre of public policy.” According to the release, the real estate sector alone can add 1-1.5 per cent to GDP if efforts are made to reduce the shortage in urban housing while moving towards a slum-free urban India.

CREDAI’s first recommendation is on offering fiscal incentives for encouraging “affordable mass housing” in the 300-600 sq.ft and up to 1,000 sq.ft segments, by providing subsidy in interest payable by the homebuyer. The Eleventh Plan has estimated an urban housing shortage of 24.7 million units, and almost all of which is in economically weaker sections (EWS) and lower income group (LIG) categories. “Home ownership is critical for this segment not only for economic reasons, but also for the health of the nation from a social perspective in terms of stability, law and order, education and employment.” The second recommendation pertains to slum redevelopment, wherein CREDAI advocates exemption of direct and indirect taxes to boost the ‘slum redevelopment’ initiative. The recommendation gains relevance as the Government intends to make urban India slum-free in five years. There are around 80 million urban poor living in substandard or unsafe housing conditions under the continuous threat of displacement.

CREDAI also recommends increasing deduction on interest paid on self-occupied residential house property, currently restricted to Rs 1.5 lakh a year.. Besides, it wants deduction under Section 80C for repayment of principal portion of housing loan for self-occupied residential house property — in addition to the present composite deduction up to Rs 1 lakh, a separate limit of up to Rs 2 lakh deduction is being demanded to encourage affordable housing sector and enhance the disposable income in the hands of the middle class. “This impetus is required keeping in mind that amounts were fixed six years ago and real estate prices have catapulted since then,” says Rungta in the release. The industry body also believes that incentives should be given to senior citizens for purchase of flats for themselves and also to children who purchase residential units for their aged parents. CREDAI also wants 100 per cent interest deduction on home loan taken by senior citizens or by their children if they opt to buy a second home in the joint name of parents who are above 55 years old; and no capital gains should be payable by the senior citizens/their children on sale of these residential units.

Though not a budgetary wish-list, developers are looking to both the Centre and States for measures that would help revive the real estate industry. Most of them want the I-T exemption raised above the current Rs 1.5 lakh a year. The Centre should also look at giving full income-tax benefit for projects priced below Rs 2,500 per sq.ft irrespective of the size/area of the apartments, says J. C. Sharma, Managing Director, Sobha Developers. He wants the Karnataka Government to reduce the value-added tax from 12.5 per cent now to 4 per cent, and scale down stamp duty and registration charges on the resale of apartments to 1 per cent of the total sale value. “This would bring in more revenue as the number of transactions would go up,” he says. Koshy Varghese, Managing Director, Value Designbuild, a Bangalore-based real estate developer, says that the Central Government should reduce excise duty on materials such as cement. “Most importantly, the housing sector must be given the status of an industry thereby allowing access to cheaper credit and easier access to loans. Bank finance is still very expensive,” he adds.

State Governments should look into further reducing stamp duty and cess. The fee payable on obtaining sanction of plans should also be reduced, which “has become prohibitive,” says Varghese. The immediate need of the hour is for the Government to take measures to ease the credit crunch situation and help the developers meet their credit needs at least till they come out of the current cash crunch situation, feels Sandeep Trivedi, Director, Development Consulting, Cushman & Wakefield India. “There is also a long-term need of rationalisation of interest rates to bring down the cost of credit to both developers and end-consumers. The government needs to provide more impetus for up-gradation of infrastructure and undertake major reforms in land and urban-planning segments. This will help in removing supply-side bottlenecks that are preventing us from sustaining our growth,” he says. According to Sridhar Kulkarni, Head-Marketing (Karnataka and Andhra Pradesh), Shriram Properties, the Government’s quick action in providing clarity on service tax, and necessary aids for home finance institutions to reduce home loan interest will go a long way in reviving the real estate market.

News Published Under:   Real Estate Developers |

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