Finance Minister Arun Jaitley will present the Union Budget 2018-19 on February 1. As the General Election is also around the corner, this budget is anticipated to be more of a populist one rather than a reformist budget. While this is the first budget post the GST-regime, this will also be the last full budget of the ruling government.
RoofandFloor spoke to some industry stalwarts on their expectations from this year’s Union budget.
Here’s what they feel would make a huge difference.
“Indian real estate looks at the forthcoming Union budget to help take things to the next level, so that industry-specific initiatives like ‘100 Smart Cities’ and ‘Housing for All by 2022’ become a reality faster, said Niranjan Hiranandani, President NAREDCO.
Reduced GST rate
One of the most important demands is to reduce the Goods and Services Tax (GST) rate. As of now, under-construction properties are levied a GST of 12%, which is higher than the previous taxes.
“During the pre-GST era, the applicable rate of service tax was around 4.5%, and value-added tax of 1% was also levied, resulting in total tax outgo of 5.5% of the sales consideration,” explained Surendra Hiranandani, CMD, House of Hiranandani.
Clarity and transparency on input tax credit will also help in rationalizing the taxes. “In the GST regime, the input tax credit is available on taxes paid on materials bought for construction, which can be the adjusted against the GST liability. The effective tax rate post adjustment is quite high as compared to the old rate of 5.5%,” added Surendra.
Sharing a different perspective, Manoj Paliwal, the Chief Financial Officer of Omkar Realtors and Developers, said, “Currently, GST is levied assuming the land cost to be 1/3rd of the selling price. This assumption is not correct for a city like Mumbai, where land prices are very high. Thus, while charging the GST, appropriate reduction should be provided for the value of the land.” This will rationalize the GST impact on the customers where prices are high.
Abolition of stamp duty
Stamp duty continues to remain in force even after implementation of GST and the rates vary from state to state, further increasing the overall cost of the property. Many developers also hope that state governments abolish the stamp duty or merge it with the existing GST rate.
Industry status
Industry status is something which is long overdue to the sector. “Government should help developers in getting better access to funds,” said Rajeev Talwar, Chairman, NAREDCO.
Reiterating the same, Anuj Puri, Chairman of ANAROCK Property Consultants added, “Real estate is one of the key GDP contributors and the fourth-largest employment generator in India. Extending industry status to the entire real estate sector will help developers raise funds at lower rates and, in turn, reduce their project costs – which will help in pushing demand.”
Tax rationalisation on REITs
As of today, the first REIT is yet to be listed in India. “Simplifying the taxation norms for REITs is a critical requirement for listings to start flowing in, which will benefit the entire real estate sector by the enhanced participation of a much broader bandwidth of investors,” explained Anuj.
Higher incentives for green buildings
The marginally higher cost of the construction of green buildings has kept the majority of developers away from such projects. Keeping the current and future environmental challenges in mind, the government should encourage developers with higher incentives in terms of FSI and/or some degree of tax exemption to adopt green building technologies.
For homebuyers
From homebuyers’ perspective, the key demand is to reduce the interest rate on home loans, with better tax rebates on loan repayments.
Further, “Housing loss set-off should not be restricted to Rs 2 Lakh under Section 24. There is no such arbitrary limit in any other sector which goes against such a labour incentive asset creation,” added Manoj Paliwal.
