The Hindu Business Line : Reverse mortgage needs clarity

There is not much change in the Budget with respect to the housing industry. While few issues have become clearer on reverse mortgage, more clarity is still required.

We are told that what the individual gets as an instalment will not be construed as income; we are also told that when you acquire the property it will not be deemed as capital gains. But, we need clarity on a third aspect — in reverse mortgage, we don’t collect interest till the end of a loan. But from the profit and loss account, we accrue income every month.

Now, this should not be taxed because that would amount to negative cash flow. Without receiving interest you will be paying tax. So this needs to be clarified.

An indirect positive

The increase in income tax exemption limits is an indirect positive for us. It increases the disposable income among middle-income households who constitute our customers.

We expected a little bit more for the infrastructure sector.

This is a sector which matters in the long term for the economy.

We have to understand what managing foreign exchange flow means. It probably has reference to the volatility in the markets and to the funds flowing out of India.

After all, if it were not for the domestic insurance and mutual fund companies the markets would have been much more volatile. The Minister probably means “manage” forex flows from the perspective of portfolio investments.

The proposal to not twice tax dividend received from a subsidiary company is very welcome.

It is a step towards making the holding company structure a viable option.

But, this proposal must also be seen in the context of the Reserve Bank of India’s discussion paper on the same.

(The author is Vice Chairman & Managing Director, HDFC Ltd)

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