The expectations of homebuyers from upcoming Union Budget 2018 is multi-fold. These expectations on one hand relate to providing additional money in the hands of tax payers (customers) and at the same time, to bring customer’s confidence back in the real estate sector either as an end-user or as an investor.
It is clearly understood that in 2018 “Housing for all” will be the top agenda of the government and in order to address the homebuyer’s expectations, following tax & regulatory reforms can be considered.
Raise in the quantum of deduction for interest on housing loan
The current tax laws restrict a home buyer to report loss from house property (home loan interest) to a limit to Rs 2 lakhs, however in case where a loan is over 20 years and the interest on home loan is over Rs 2 lakhs, then it will be carried forward to next year and hence the loss incurred over 20 years will lapse every year. This should be relooked while proposing the Budget 2018.
Bring stamp duty under the purview of Goods & Services Tax (GST)
The government can consider bringing stamp duty under GST which, if done, will significantly bring down the real estate prices.
Relaxation of period in case the project is delayed
This is something which is not addressed as yet and it is a serious concern where the construction is delayed by the developer beyond a period of 3 years and where the home buyer is unable to get exemption for long-term capital gains. Although under RERA, it aims to ensure timely delivery but related tax laws should also sink with the same. Hence, a more pragmatic view is required in respect of the period to be considered for the purposes of long term capital gain benefit.
Extension in loan period & deduction limit for first time home buyers
Under this, currently Rs 50,000 additional deduction is provided for first time homebuyers from loan period between Apr 1, 2016 to March 31, 2017 and property value of Rs 50 lakhs despite of location & size of the apartment. Problem lies where a person looking to purchase a house in metro is unable to find a house under this category and thus this does not benefit. This was the main reason why this scheme didn’t do well, as majority of the demand still came from these regions.
Thus, the government should consider extending the loan period for at least 5 more years and increase the limit.
Increase in house rent deduction limit (HRA) from 50% to 60% of basic salary for metro cities & 40% to 50% for non-metro cities
This move will certainly increase auxiliary income in the hands of tax payers and will also support government’s mission for “Rental housing”, where developers will start building such properties to promote work-walk culture in near future.
This is one of the critical issues which needs to be addressed by the government under regulatory reforms in this Budget as RERA is unable to address the same. Single window clearance mechanism for real estate projects will make the real estate process more seamless and quicker and effectively address two concerns; developer’s long-stating reasons for not completing the projects on time and timely delivery for customers.
Year 2017 can be clearly described as a year of transformation for the sector and have given a very solid platform for the real estate sector to perform and contribute to the GDP in a significant manner. However, further tweaks in the existing laws and additional incentives mentioned above can really provide the necessary fillip to the sector to grow faster.moneycontrol