No Tax Sops for Non-Premium Housing?

January 24, 2007	(Be the first to rate this story!)  Loading ...
Print This Story   Email This Story Subscribe Newsletter

Real estate developers may have to dig deeper into their pockets if the Government withdraws the income tax benefits they are currently enjoying under Section 80-1B (10) of the Income tax Act. This is likely to be enforced from the next fiscal year, 2007.

Property developers in Mumbai and Delhi enjoy tax exemptions on profits on residential property up to 1000 sq.ft in area, and up to 1500 sq.ft. in other cities. March 31, 2007 is likely to be the deadline for availing this benefit.

Sources in the urban housing ministry believe that private sector investment in real estate has matured as on date, and builders are earning handsome profits on their money. Incentives can be withdrawn at this stage, as the real estate market has achieved the stability to manage on its own.

The misuse of this tax benefit by most developers in Delhi and Mumbai to construct apartments just short of 1000sq. ft is also probably why the Government is re-considering this facility. Moreover, credit in the housing sector is rising higher than desired levels, and the RBI has had to step in with higher interest rates to curb the flow.

On the other hand, the National Housing Board (NHB) has been found inadequate in meeting housing needs of the low income groups. The shortfall has been accumulating since 1999, when only 27,000 LIG homes were built as against a target of 44,000. The Economically Weaker Sections (EWS) category is even worse off – only 28,541 dwelling units were constructed as against a target of 96,571 units.

Indian property developers are unhappy over the government’s proposal to remove sops, and threaten to exit the category if these concessions are removed. Being a highly capital intensive industry, and funds management always a constraint, they are demanding extension of benefits for another five years. Without incentives in the mass housing sector, shortfalls in targets will never be met, warn developers.

News Published Under:   Real Estate India, Delhi, Mumbai, Real Estate Developers |

Comments