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In an attempt to boost the real estate industry's growth, developers are pushing for enhanced tax incentives for buyers. This involves proposing to lower the tax burden linked to long-term capital gains, broaden the definition of affordable housing, and raise the deduction allowed for principal payments on home loans. The Confederation of Real Estate Developers’ Associations of India (CREDAI) has taken the initiative to approach the finance ministry in anticipation of the next Union Budget.
In addition to calling for the restoration of the middle-class credit-linked subsidy system (CLSS), they also want stamp duty to be lowered, approval procedures to be streamlined, and developers involved in affordable housing projects to be given subsidies. The real estate industry, which significantly affects GDP, employment, and infrastructure development, is eager for a budget that solves enduring issues and creates the conditions for long-term growth, especially in affordable housing. CREDAI President Boman Irani emphasises how important a supportive fiscal policy is.
Irani highlights CREDAI's dedication to working closely with the government to create an atmosphere that supports the growth of the real estate industry and, consequently, the Indian economy as a whole. He claims that these CREDAI approaches address fundamental problems and provide both supply and demand dynamics for new life. This calculated combination of expanded tax exemptions and minor modifications to the criteria of affordable housing is a calculated strategy. Projected as they are, these measures are expected to set a clear direction for the country's real estate sector, which is expected to contribute about 20% of GDP once it hits the coveted $10 trillion mark.
The current scenario dictates a cap of Rs 150,000 for the deduction of principal repayment on housing loans. This limitation, when compounded with other tax-saving instruments, prevents numerous homebuyers from benefiting themselves of this deduction. CREDAI asserts that the deduction under Section 80C for principal repayment demands growth. Alternatively, it suggests treating the deduction for the principal repayment of housing loans as a distinct and standalone exemption.
The existing definition of affordable housing, fixed at homes costing up to Rs 45 lakhs, was outlined in 2017. However, escalating housing prices in India, rising by approximately 24% since June 2018, render the current cap impractical for developers to adhere to. In response, CREDAI advocates for a revision of the definition of affordable housing, proposing a unit with a 90-sqm RERA carpet area in metropolises and a 120-sqm RERA carpet area in non-metros without imposing a cap on the unit cost.
CREDAI highlights a shortfall in the existing Rs 2 lakh limit for interest deduction on rental income under Section 24(b). Homebuyers forfeit the benefit of the interest claim that exceeds Rs 2 lakh, despite having paid the interest in full. CREDAI posits that, in the case of individuals, interest on first-self-occupied properties should be exempt from limits. Alternatively, it suggests that the limit for the deduction of interest needs to be elevated to Rs 5 lakh for self-occupied properties.
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