Indian real estate sector had experienced a massive slowdown during 2017 as it was regarded as a watershed year for the realty stakeholders. Starting with the Demonetization, moving ahead with rejigging measures like RERA, GST and Benami Property Act the sector had witnessed a slew of institutional policy changes and reforms. However, the market is on its way to restoration and expecting some beneficial manoeuvres from the Union Budget 2018.
Union Budget 2017 appeared as a big boon for the affordable housing sector, where the budget granted the ‘infrastructure status’ to set a bigger pitch for the urbanization in tier-II and tier-III towns.
We’ve therefore tired to analyze the expectation of the home buyers from the Union Budget 2018:
The compensation limit for housing loss should be increased– The previous budget constrained the loss of housing property which could be a set-off against other income to Rs. 2 lacs. House property loss in excess of Rs. 2 lacs has to be extended and adjusted against the rental yields of future years. Buyers are expecting an extension of this cap so that tax payers get allowed setting off a larger part of the house property loss against other income.
Increased deduction for pre-construction interest– As per the Income Tax Act, there is an interest on the home loan that is paid for the phase during which the house is under the construction. Later on, this amount can be claimed as a deduction in five equal installments from the financial year in which the house is finished. The cap on the deduction of home loan interest was a major shock for the landlords. From the upcoming budget 2018, home buyers are anticipating that the deduction for the pre-construction interest should be approved in the year of payment. Furthermore, a separate limit should be laid down for the deduction of Rs. 2 lac and above.
Delay in project completion should be strictly handled– Presently the deduction of the interest on the home loans has been extended to Rs. 2 lac from Rs. 30000 given the fulfillment of the condition that the property has been developed within 5 years from the end of the financial year in which the loan has been borrowed. A tax payer might lose a huge amount under this existing set up due to the builder’s dillydally in project deliverance. Even though RERA mandates timely completion of the projects, IT rules should also recognize this problem and grant buyers a relaxation of the period if the project gets delayed.
“This year the expectation from the budget is relatively high, as the previous budget reduced the average tax payer’s burden. Also, all the existing issues related to GST tax slabs expected to be closely scrutinized so that the market gets vastly benefited from the unified tax regime,”-said Mr Mahesh Somani, Chairman- National RERA Committee, National Association of Realtors India (NAR-INDIA).
Asking on the real estate market expectation from the upcoming Union Budget, Mr Somani said, “Homebuyers and realty investors had opted for a defence mechanism when it comes to real estate investment in 2017 as the sector got impacted by several governmental policy decisions and reform measures. The forthcoming budget is expected to push the market performing better.”
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