Stimulus Expected for Real Estate Sector in Budget 09- Experts

Published: June 18, 2009

Although, Indian economy as a whole has largely been insulated against the global economic slowdown, the Indian real estate sector has been severely been affected keeping in sync with the fortunes of the global real estate sector. Demand dynamics of one large industry decide the fortune of its ancillary industries. The ups and downs of the real estate market have serious implications on companies whose future is linked to the housing and infrastructure demand in India.

The risk straddle includes industries such as furniture, granites, ceramic tiles, paints, power cables, glass, electrical equipments and interior designers among others, which exemplifies the significant backward and forward linkages that the real estate sector has with the economy. There is a need for the Government to provide a stimulus for the industry so as to revive this ailing spectrum of sectors. And what better time can there be, than the forthcoming budget!

Some of the measures that should be taken by the Government are as follows:

• Given the demand for and emphasis of the Government of India on affordable housing (through lower interest rates on loans upto Rs 30 lakhs) there is a need to reintroduce tax holiday under section 80IB for housing.

• Tax holiday available to hotels under section 80ID to be extended 10 years from existing time limit of 5 yrs. The gestation period in hotel industry, itself, stretches from 4 to 5 yrs.

• To garner resources for providing liquidity to the Indian real estate industry, there is a need to: Re-introduce ‘tax pass through’ status for domestic venture capital funds that invest in the Indian real estate sector; Clarify that the Real Estate Mutual Funds are to be treated as equity oriented fund; Extend the external commercial borrowing scheme to the entire Indian real estate sector including Special Economic Zones and not just 100 acre township, hotels, hospitals in view of the moderate international costs of borrowing;

• Encourage states to reduce stamp duty to 5 percent and to provide a system of credit for each stage of sale i.e. levy on value addition.

• Increase in deduction available under section 24(b) to Rs 300,000, against, existing limit of Rs 150,000 for self occupied houses.

• Increase the basic exemption limit under provisions of Wealth tax Act to Rs 50 lakhs against existing limit of Rs 15 lakhs keeping in perspective the price of property, etc.

• Service tax provisions should be amended as follows: It has been clarified that no service tax should be levied in case pre-construction sale of residential complex where the seller and the buyer enter into an ‘agreement to sell’. Similar clarification should be issued for pre-construction sale of commercial complex. Service tax on renting immovable property should be abolished.

• To reduce the cost of procurement of capital equipments for construction purposes there should reduction/ rationalization of customs duty (exemption from special additional duty) and excise duty (8 percent to 4 percent)

In summary, the above measures would go a long way in providing much needed succour to the Indian real estate sector in these difficult times.

Source: Indian Realty News

Posted under categories: News
Tags: , , ,

About Zamanzar

Zamanzar Advisory Pvt. Ltd. is a real estate advisory firm located in New Delhi, India. We offer online property search tools and offline services to help complete the transaction. Our services cater to real estate buyers, renters, and sellers. Visit Zamanzar to find out more!

1 Comment so far

  1. Madurai hotels October 1, 2009 4:23 pm

    Thanks for u r information

Leave a Comment

Name (required)

Email (required)



More Blog Posts