Four months ahead of the Union Budget, industry body CREDAI with more than 11,000 builders as members, has asked the Finance Minister for tax sops on behalf of home buyers, and are convinced this would lay the foundation for a recovery in the housing market.
India’s residential property market is going through one of its worst periods ever. Unsold inventories have touched record highs and cash strapped builders say buyers won’t return unless interest rates reach range of 8-9 percent. Till then, they’re turning to the government for relief. Four months ahead of the Union Budget, industry body CREDAI with more than 11,000 builders as members, has asked the Finance Minister for tax sops on behalf of home buyers, and are convinced this would lay the foundation for a recovery in the housing market. The main request is to remove the Rs 2 lakh limit for tax deduction on the interest component of a home loan for a first time buyers on self use. It has also asked for hike in tax deduction limit under section 24 (b) to Rs 3 lakh from the current Rs 2 lakh, if it is not the first property bought by the consumer. CREDAI has also asked Jaitley to do away with the pre-condition for availing this tax deduction of upto Rs 2 lakh. The pre condition mandates the project’s construction be completed within 3 years from the end of financial year in which the buyer borrows the capital. CREDAI argues this is beyond the control of the home buyer. “Suppose the government was to give an interest subvention on a housing loan of 2 percent for 3 years, and we are able to unleash a housing loan market of Rs 1 lakh crore, the dent to the government would be Rs 2000 crore every year,” said Getamber Anand, President, CREDAI adding that this would translate to Rs 6000 crore, but direct and indirect tax revenue would be close to Rs 25000 cr. “One house for anybody wherever the interest is there for one house should be 100 percent exempt. Today the RBI rules only have a 15 percent threshold for real estate and the rest is for other industries, if that can be increased,” said Irfan Razack, CMD, Prestige Group. A bigger basket of tax breaks under section 80c, which deal with deductions on personal investments. Currently, the ceiling of deduction for principal repayment of a home loan is Rs 1 lakh, and CREDAI wants that hiked to Rs 5 lakh spread over 5 years for first time home buyers. The builder lobby is also asking the governemnt to look at creating a new standalone exemption for housing. “I think there has to be some rationalisation, there has to be some slab system and i believe that the lower end of the pyramid, the economically weaker section deserve a beatter deal,” said Razack. The third tax reform being sought is to do with section 54f, that allows exemption from capital gains provided it is reinvested in the residential market. Builders want the government to reverse the decision taken in the 2014 finance act which said the exemption is available only for the capital gains invested in repurchasing one residential property, and not more.