Tuesday, June 23, 2009

Real estate sector seeks lower loan rates, higher exemptions

PUNE: Lower interest rates for home loans, higher tax exemptions for repayments and restoration of Section 80-IB of the Income Tax (I-T) Act top the real estate sector's budget wish list this year. Appropriate action on these counts will help improve the fortunes of this sector be devilled by a lack of demand for quite some time the players said. As the entire thrust of the ongoing debate in the sector is on reducing the prices of homes, an instrument such as the budget can be used to reduce the burden of both taxes and costs on the home buyer, Rohit Gera, executive director, Gera Developments Private Limited, said. "An income tax deduction up to Rs 1.50 lakh, currently available against interest paid on home loans, should be raised and so should the deduction for the principal amount repaid, currently restricted to Rs 1 lakh," Gera said. He added that the finance minister should also allow higher standard deduction (the amount deducted from rental income earned from a property) from rental income so that more rental stock can be available in the market. Gera said Section 80-IB of the I-T Act, which exempted profits earned by developers from housing units less than 1,500 sq ft in size, should be restored so that the overall cost of a house for a buyer will be reduced. Satish Magar, president of the Confederation of Real Estate Developers' Associations (Credai), Pune, said the key issues pertain to lower costs of housing and availability of funding to the sector. Magar said the deadlock over funding of housing projects by financial institutions will be broken if the construction industry is accorded priority sector status. "Banks and other lenders can ensure that developers are not using the money for land acquisitions and fund projects where construction has begun," Magar said. According to R Vasudevan, chairman and managing director, Vascon Engineers Limited, the definition of long-term capital gains in respect of the real estate sector should be modified to mean gains earned by sale of a unit after one year of acquiring it. At present, the term refers to gains earned by sale of a unit after three years. Vasudevan also demanded infrastructure status for the construction industry and asked for an increase in the deduction available on interest paid on home loans. Vasudevan said the upper limit for stamp duty on realty deals should be fixed at Rs 1 crore. Vinay Phadnis, chairman of the Sahil group of companies, said a reduction in service tax along with modification of the entire income tax structure for the real estate industry is the need of the hour. The government should prevail upon the banking sector to lend at 6 to 6.5 per cent for houses costing up to Rs 30 lakh, he stressed. "We expect the finance minister to create an environment of refinancing real estate projects and enabling the secondary market to finance the assets," Phadnis said. Aniruddha Deshpande, managing director, City Corporation Limited, said the budget should encourage affordable housing through further home loan support and housing policy reforms. According to Vishwajeet Jhavar, CEO, Marvel Realtors, "The real estate industry is one of the key drivers of growth for the country. We hope that this budget will bring some good news that will steer and cheer real estate developers and at the same time create a conducive buying environment for the consumer. We also expect some positive steps towards relaxing the norms for external commercial borrowings and on the foreign direct investment front, which will serve as an impetus to the industry." Atul Goel, director, Goel Ganga group, said the government must make an attempt to reduce the tax burden on real estate so that people get homes at affordable prices. "For every Rs 100 a buyer pays, there is a tax burden of Rs 45. If this is brought down, homes will become cheaper," he pointed out. Hemant Naiknavare of Naiknavare Developers suggested that there should be appropriate I-T exemption for slum redevelopment projects and financial institutions should fund such projects. He also said the JNNURM subsidy should be available to residents of slums that have come up after 1995 who are otherwise ineligible under the Slum Rehabilitation Authority norms.

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