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Realtors Seek Higher Tax Benefits for Homebuyers

Real estate developers are seeking an increase in tax exemption on interest paid on home loans, exemption on rental incomes, uniformity and expansion in the definition of affordable housing in the upcoming Budget for 2023-24 to help the sector witness sustained growth by supporting demand creation.

Realty developers’ body, the Confederation of Real Estate Developers’ Associations of India (CREDAI), has written to the finance ministry to also suggest relaxation on long-term capital gains for investments and tax exemption on investments in real estate through REITs.

With increasing retail inflation and continuous repo rate hikes, resulting in higher instalments on all consumer loans, there is a compelling need to increase the existing limit of 2 lakh on exemption of interest paid on home loans to at least 5 lakh, said the industry body.

This is expected to provide extra disposable income in the hands of middle-income home- owners and attract prospective homebuyers to buy a home and thereby boost the demand.

“Our recommendations are focused on sustaining the current growth in the sector, boosting demand and exemptions for homebuyers,” said Harsh Vardhan Patodia, president, CREDAI. “The real estate sector can add millions of livelihoods in a short time and significantly contribute to GDP.

Continuous rate hikes may cause short-term turbulence in overall housing demand when buyers are optimistic about making decisions, adding to buyers’ overall acquisition cost.”

According to him, the property sector has started to see steady recovery across key markets, primarily driven by end users.

However, successive repo rate hikes may have an impact on the interest-sensitive sector and the ongoing recovery. The sector’s growth will directly fuel the growth of more than 256 allied and ancillary industries, there- by creating a cascading effect on job creation and economic development. Additionally, it has also suggested the price cap of 45 lakh on residential units to qualify as affordable housing needs to be revised as there have been substantial changes in the prices of various construction raw materials, labour costs and overall construction costs. For affordable housing, developers had earlier also suggested increasing the limit on value of the house to be raised to 75 lakh in non-metro cities and 1.50 crore in metro cities from the current ceiling of 45 lakh. Alternatively, they had recommended increasing the size of such apartments to 90 sq meters in metros from 60 sq meters and 120 sq meters in non-metros from 90 sq meters. The upward revision in cost structure has impacted the overall price of houses leading to ineligibility for tax exemptions under Section 80IBA under which affordable housing projects are provided a deduction. CREDAI has urged the officials to expand the definition of affordable housing units only on carpet areas without any price cap.S-ET

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