Builders and developers have called for focussed support in the Budget for the first-time home buyer and measures to augment supply of housing for affordable and low income groups. Industry representatives have called for a simplification of systems and tax reliefs as a step to bringing down costs and catalyse developments.
The Confederation of Real Estate Developers Association of India and the Royal Institution of Chartered Surveyors – India, have pressed for concessions to the first-time home buyer and measures to encourage rental housing.
The RICS India has suggested tax cuts for first-time home buyers and residential rentals to improve supply and affordability.
As is the international practice, first-time home buyers should be given tax credits up to 10 per cent of the value of the residential unit, with the credit reclaimed over three assessment years.
RICS also presses for revision of tax exemption on cost of initial home loan and interest in line with the increase in property prices to ensure affordability – RICS suggests an increase of Rs 1.5 lakh to Rs 2 lakh on interest payments.
Rental housing constraints could be addressed by supporting the sector with a cut in tax rates to about 20 per cent from 30 per cent; taxing just 50 per cent of the income against the prevailing 70 per cent; and hiking income tax exemption from rental income under Section 24 to 50 per cent.
Fair practices
The RICS, an international, self regulatory professional body relating to real estate, also calls for a mechanism for consumer protection and fair practices in real estate transactions. This will also help increase domestic and foreign investments in this sector.
The real estate transactions are now non-transparent and biased towards developers. This impacts consumers in the form of high cost and loss of interest fee on capital locked in delayed projects.
As a measure of support for infrastructure development and affordable housing, RICS suggests that the definition of infrastructure be broadened to include integrated townships of over 100 acres and encouraging private investments in infrastructure sector by allowing long-term sources of capital such as insurance and pension funds.
A dedicated affordable housing fund along the lines of infrastructure fund could be set up with the government contributing a portion of the fund through bonds ad retail investments in lieu of tax benefits.
The funds should be available to developers, NGOs, private intermediaries at low interest rates for constructing houses for low income groups and economically weaker sections.
State Governments could also consider setting up a ‘housing trust fund' from their own resources to augment supply of low cost housing. Unutilised land could also be recovered from developers or vacant land tax levied to promote efficient use of land. Reverse tendering could be adopted in the place of auctions to limit land cost for affordable housing.
CREDAI proposals
The Confederation of Real Developers Association of India has said the Government could consider a scheme along the lines of the First-Time Home Buyer Tax Credit allowed in the US with the benefits going directly to the consumer.
CREDAI has suggested that a personal tax deduction of about 10 per cent be allowed on the cost of a dwelling unit with a total deduction cap of Rs 5 lakh a year. Deduction of Rs 1 lakh allowed on the principal repayment in housing loans under Section 80 C may be hiked by about Rs 2 lakh, says CREDAI.
To augment supply of rental housing, CREDAI suggests that income from rental housing be taxed at a flat rate of 10 per cent and the deduction allowed in rental income be hiked to 50 per cent from the present 30 per cent, with women and senior citizens allowed full deduction.
Mr Pranab Datta, Vice-Chairman and Managing Director, Knight Frank India, said in press release, “last budget had a clear thrust on infrastructure development, which should continue to be a focus area.”
Rising urbanisation calls for a corresponding initiative of developing new cities, which are nowhere a replica of the crowded cities of today.
Policy initiatives that address infrastructure constraints in existing cities and serve as a model for new cities will relieve the burdened metro and Tier I cities. It is therefore essential to formulate budgetary policies with a vision and a plan for next 10-15 years to cope with the demand for increasing urbanisation.
Integrated townships and urban centres should be built along the regions of planned industrial and commercial activities. These will support residential development and emerge as new centres for growth. The Delhi Mumbai Industrial Corridor (DMIC) and the proposed integrated townships along the way are an example.
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