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As we approach the upcoming budget, the Indian government is poised to unleash a transformative vision for the real estate sector, serving as a pivotal driver in revitalizing our nation's economy. Industry expects a comprehensive overhaul of tax policies to foster competitiveness and efficiency across corporate and individual tax frameworks.
For the home buyer, increasing the limit of interest deduction paid on home loans from 2 lacs to 5 lacs, bringing long-term capital gains at 10 per cent on par with equity shares; and reducing the period of holding house property to 12 months from the existing 24/36 months to qualify as a long-term Capital asset. Also, the dividend taxation rate in resident investors' hands may be kept at 10% to avoid discrimination between resident and non-resident investors. Such tax rationalization measures will play an important role in positively impacting home buyer sentiment.
From an industry perspective, corporate tax benefits granted to manufacturing companies must be extended to all entities like firms, LLPs, and Individuals to bring uniformity. Also, a surcharge introduced as a temporary measure should be withdrawn with buoyancy in tax collection. Extending the benefit of the Alternate tax rate at 15% for infrastructure and housing projects will help attract more investment and bolster developmental activity. Additionally, the taxability of conversion of stock in trade into capital asset should be deferred to the year of actual sale of capital asset to ensure better cash flow availability for the tax payments.
Two segments, rental and affordable housing, need a shot in the arm in this budget. “For rental housing, enhancements in HRA Tax Exemption; an increased depreciation rate for rental projects, exemption from tax burden on notional rental income, and allowing ‘carry on’ of loss from rental income will be pivotal in incentivizing rental housing in India. To cater for the housing deficit and unaffordability of career migrants to own a house across multiple cities, we strongly demand the finalization of rental housing policy (sec 80 IBA (6) (da)) at the state level. The tax incentivization to the developers of rental housing projects for the first 5 years will go a long way in achieving the objective of Housing for All.
To resuscitate affordable housing, it is demanded that the cap value of homes be raised to 1cr in metro cities that have observed a muted demand-supply scenario. Also, the hindrances regarding 80–90% FAR consumption and payment of tax on profits via AMT\ MAT should be withdrawn.
The Indian real estate industry is one of the largest and most buoyant in the world, appealing to players across the globe. It is a source of substantial tax revenue for the central and state governments. Industry counts on timely intervention by the government in the form of fiscal stimulus and policy reforms to fuel more green shoots in the Indian real estate sector and move up the GDP growth index. Industry pins hope the Union Budget FY 25 will include earnest measures to catapult GDP growth by double digits, foster employment, and boost investment and consumption. Such fundamental measures are critical to propel India's roadmap in becoming a US$ 5 trillion economy."
