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The real estate industry in India has been in a bad state for a while, after the economic policies were implemented in 2017. The demonetization in 2016, too, had an adverse effect on the real estate industry. Besides, GST and inception of RERA have slowed down the industry to a certain extent. The Union Budget of 2018 can help the industry to revive its health. In 2017, the government came up with certain measures to foster the growth of the industry, while eliminating black money from the sector. These include the affordable housing policies and the introduction of Real Estate Investment Trusts, besides other measures. However, the challenges in the industry are still large. Here are the key areas where Union Finance Minister, Arun Jaitley can help the real estate sector with the budget.
The real estate sector has been seeking the status of an industry for many years. If the budget grants this wish, the real estate industry will be considered as a priority sector. This will enable the developers to obtain loans at low rates of interest. The construction costs will also come down, which will make homes more affordable to the end users.
The Confederation of Real Estate Developers’ Association of India (CREDAI) has recommended certain amendments in the Finance Act 2017, which is likely to ease up the tax burden in the sector. Presently, the GST in the real estate sector is 12%, which is high in comparison to the tax rate prior to the implementation of GST. The developers expect certain tax benefits from the budget which will increase the sales in the sector. They want the tax to be reduced to 6% in the real estate industry.
Benefits to buyers
According to the Finance Act 2017, the restriction on loss from house property that the buyers could set against other income was fixed at INR 2 lakhs. In case the amount was exceeded, it had to be carried forward and they had to make adjustments against the rental income in the years to come. With the rising property cost and loan rates in the country, this limit needs to be increased. This will allow the taxpayers to set off a larger section of the house property loss against other income. If not, several salaried persons will be unwilling to invest in multiple properties.
Indirect tax benefits
Certain Tax benefits can also help the buyers in the real estate industry. At present, the rate of GST on under-construction projects is high. This burden is passed on to the homebuyers, which increases the cost of homes. Apart from GST, they also need to pay for stamp duties that the respective state governments have imposed. As a result, the overall expenses of the buyers increase by 18-20%. These areas have to be focused on in order to make homes affordable.
Well, India’s real estate sector is likely to revive in 2018 with increased transparency in the industry. Finance Minister Arun Jaitley can help the industry in a number of ways, as stated here. The developers expect the Union Budget 2018 to ease up the situation in the industry.
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