Budget 2018: 5 big misses of Arun Jaitley

Prior to the announcement of the Union Budget 2018-19, the real estate sector was hoping for some major sops. We look back at five major measures that could have made home buying easier but found no mention in the budget

There have been several long-standing demands from the real estate sector and prior to Budget 2018, there were hopes that at least some of them would be addressed. The Budget for 2018-19, however, has been termed by developers and home buyers as a populist one, which ignores the real estate sector. According to Rohit Gera, MD of Gera Developments, the Budget missed out some key points, such as:

  • “An increase in the interest deduction limit for home buyers.
  • Removing some anomalies in section 80 ib that would help in increasing the supply of affordable homes from larger projects.
  • Using the Smart City initiative to incentivise cities that implemented fast-track approval processes, to help in ease of doing business.”

Realty experts and developers list five big announcements related to the realty sector that Budget 2018 missed out completely.

 

1. REIT-related announcements

Experts believe that 100 per cent tax exemption for Indian investors in Real Estate Investment Trusts (REITs), would have encouraged investments. Instead, REITs will now have to face long-term capital gains tax. The imposition of long-term capital gains tax could dampen sentiments. “The announcements in the Budget ignored REITs but we understand that subsequent notes may address remaining issues. This has to be seen in the light of the recent announcements and amendment made by the Securities and Exchange Board of India (SEBI). The last major hurdle for REITs to kick-off in India, i.e., DDT, was already addressed in the previous year’s budget announcement,” explains Ramesh Nair, CEO and country head, JLL India.

See also: Budget 2018: A populist budget, but not for real estate

2. Separate deduction benefit for home loans

For first-time home buyers, an additional tax deduction of up to Rs 50,000 per financial year, is available for both, principal repayment and the interest paid. The additional deduction is given on loans up to Rs 35 lakhs, only if the property value does not exceed Rs 50 lakhs.

“It would have helped if the Budget had extended the deduction to all first-time home buyers, irrespective of the property value. The demand for housing is huge in India and the government could have incentivised home buying, especially for first-time home buyers. Also, tax concessions on house insurance premiums could have been introduced, to encourage home buyers to insure their homes,” suggests Sunil Aggarwal, associate dean and director, RICS School of Built Environment.

 

3. Inclusion of stamp duty under GST

“Like the Goods and Services Tax (GST), single-window clearances and stamp duty could also have been brought into a centre-state ambit, with states toeing the line with incentives and benefits upon implementation,” says Nair. Stamp duty, if subsumed under the GST, could serve to reduce the burden of multiple taxes on real estate. “We understand that states will be consulted, as part of the centre-state dialogue process, in order to come to a consensus,” adds Nair.

 

4. No additional tax benefits for home buyers under Section 80C, 80EE, or 24b

Experts believe that sops under Section 80C/80EE/24b, could have also spurred the demand for real estate. An increase in the limits, would have infused additional liquidity in the hands of home buyers and propelled end-users, especially fence-sitters, to take steps towards investing in real estate.

 

5. Industry status and single-window clearance ignored

“Real estate is the second largest employer in the country, which directly or indirectly contributes to over 15 per cent of India’s GDP. Inability to obtain funds at reasonable rates of interest, not only delays the construction process but also increases the final cost of homes. An industry status would have helped developers to secure finance at reasonable interest rates,” concludes Aggarwal.

 

Realty sector expectations, which Budget 2018 missed out

  • Demand for industry status.
  • Inclusion of stamp duty in GST.
  • Separate deduction for principal repayment on home loans, over and above Section 80C.
  • Single-window clearances for real estate projects.
  • Tax benefits on REITs.

 

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