Real estate wish list for Budget 2011-12
It is that time of the year when the government sets its economic agenda for the year ahead. The real estate industry is looking at several breaks from the Budget both on the policy and taxation front. Most market watchers believe that to get government finances in order (the government is facing a fiscal deficit of 5% in FY12) the government will have to widen and deepen the tax net. There are likely to be cuts in excise duty exemptions and more services will be made liable to be taxed.
Property prices have shot up and now interest rates are going up making monthly mortgage payments more expensive. Not surprisingly then the industry is looking to Finance Minister Pranab Mukherjee for some stimulus to boost home sales. Its wish list includes measures to lower interest rates on home loans, reduction in stamp duty and rollback of service tax on projects under construction .
Indutry body, ASSOCHAM has demanded an extension for deduction of interest on housing loan. Section 24 of the Act provides for deduction of interest on housing loans upto Rs 1.5 lakhs for self occupied property on borrowings done after April 1999 and acquisition/construction completed within 3 years. This limit was introduced by the Finance Act, 2001 and therefore this limit needs to be revised to at least Rs. 2.5 lakhs. Moreover, in the context of the time required for completion of large housing projects, it is recommended that the time limit be extended to 5 years.
In real estate, it is likely that there could be an increase in the income-tax deduction for home loans (to Rs3,00,000 from the current Rs1,50,000). It is also likely that interest subvention of 1% on loans of up to Rs1 million on property of Rs2 million will be extended by another year. There is also a slim chance that tax holidays for developing affordable housing (Section 80IB) could be reinstated.
Developers who are raising funds at high interest rates also expect to get an infrastructure status to access funds at lower rates. This was a wish in last year’s budget as well but was not granted by the FM. The inflation-hit industry also expects customs duty on steel and cement to be reduced.
Reference:
ASSOCHAM, Budget 2011-12, cuts in excise duty exemption, lower interest rates on home loans, Real estate industry budget 2011, Real estate wish list for Budget 2011, reduction in stamp duty, Wish list for Budget 2011
