Realty Industry in Quest for Tax Exception

Bangalore: The real estate industry wants taxes to be waved off for the upcoming Budget 2012-13, in order to achieve reasonably priced housing. Builders also demand for infrastructure status for the residential section, promotion of rental housing and the raise in home loan tax bar, reports Dilasha Seth of Business Standard.

In the previous year’s budget, there were no important measures taken for the residential sector but in the upcoming budget, the National Real Estate Development Council (NAREDCO) a real estate industry association is seeking infrastructure status for housing and Confederation of Real Estate Developers' Associations of India (CREDAI) is diving for tax exception for reasonably priced housing.

Lalit Jain, president of CREDAI, raised a point saying that how affordable housing can be expected with high taxes, he says if the housing cost is 3000 per square feet then 1000 goes only in taxes, which means almost 36 percent of saleable value goes away only in taxes like sales tax, value added tax (VAT), excise, stamp duty etc. He further said that, if the tax exemption is put into practice then 27 million of residential requirement can be attained which would further add seven to eight percent to the gross domestic product (GDP) growth.

R.R Singh, director general, NAREDCO stated that, Indian government should mull over categorizing housing under infrastructure status as the World Bank does. He also added that the real estate sector desires the home loan tax bar to be increased twice from 150000 to 300000. He argues by saying that “We base this on the grounds that cost inflation index has doubled, the house prices have gone up by 50 per cent on an average since 2002,” reports Business Standard.

According to Singh, the real estate sector has one more important demand which is the promotion of rental housing as it is hard for people to purchase a house and low rental income bought discouragement to developers to construct rental housing.

Royal Institution of Chartered Surveyors (RICS) has proposed a report to the ministry of finance where they have suggested financial support in interest rates for existing home loans adding to new housing loans. On affordable housing front, RICS has suggested to set up a fund that would only contribute to affordable housing akin to infrastructure funds that needs to start with 5000 to 10000 crore where the government would support the fund partially by public issuance of bonds and the rest of the funds be raised through retail investments instead of tax benefits.

Sachin Sandhir, MD of RICS, South Asia, stated that these funds should be given to developers/NGOs/private intermediates at low interest rates so that they can construct EWS/LIG housing. RICS has also recommended decrease in tax rate on rental earnings from 30 percent to 20 percent and the current rental taxing which is 70 percent should be lowered to 50 percent suggests RICS.