Pre Budget opinion by Dr R.Kumar, Managing Director NAVIN’S

Dr Kumar, MD and Chairman, Navin's.

In general what is expected out of this budget can be classified into 3 aspects namely:
• Tax related issues
• Policy related issues
• General issues
Industry status to the real estate sector is a long pending demand of the Real estate industry to give it an industry status, to enable the industry to raise finance and other financial institutions on par with other industries.
Prime Minister Modi had over 2 years back announced the housing for all scheme. Already 2 years has passed and by 2022, there are only about 6 years left to achieve this dream. Simple SOP’S and small conclusions are not going to help in achieving his dream, if one is serious about it.
Major and quantum changes in policy, administration and taxation structures are essential to bring about a change and give a boost to this sagging industry.
The minimum expected changes would include:
Infrastructure status for housing. The housing industry by getting this status will enable banks to provide priority sector lending and bring taxation benefits to the sector.
Another policy level change may be required to exempt housing, construction industry from service tax or fixing a lower level of GST specifically for housing.
A way has be found to provide this relief for the housing sector as the introduction of GST is likely to have cast a higher burden on the home buyers. This move will directly benefit home buyers.
Policy changes for providing input credit for registration and stamp duty for housing projects. The developer buys the land only for the purpose of developing a housing project and selling. Now the process involves paying stamp duty twice, 1st by the developer and 2nd by the home buyer.
This pushes the cost of a home further by 4 % to 5%, if we want more homes to be bought, this justifiable relief has to be provided for all home buyers.
TAXATION RELATED ISSUES:
Like in deduction, limit on home loan interest with the housing costs being phenomenally high in all major cities from 50 Lakhs to 1 crore and more ,it is necessary to increase the exemption limit on the housing loans from 2lakhs to 5 lakhs. Further ,the 3 year limitation for possession of the home (constructed) shall be removed, as the home buyer is unnecessarily getting penalized for no fault of his.
The deduction shall be made available from the first EMI itself and shall continue until completion of the home loan. Similarly the deduction limit for repayment or home loan shall be at least 3lakhs to 5 lakhs.
House Rent Allowance:
The house rent allowance allowed for deduction to income tax for self-employed individuals and small entrepreneur’s from the present limit of 2000 to be equitable to the salaried class or the actual rent paid based on rental receipts.
Completely remove the dividend distribution tax for RITES. This issue has been holding back formation of RITES in this country.
General issues:
Administrative reforms, immediate introduction of single window system for approval of real estate projects is a must.
India ranks bottom 184 out of 189 countries in ease of getting construction permits.
Drastic steps are required to cut down red tape and approval delays with involvement of multiple agencies.
Single window clearance with prescribed limits for approval has to be made mandatory for all state government to adopt.
Authorized architects, licensed engineers or licensed program architects to approve building plans in a measure that shall be introduced. This will pave way for eradication of the rampant corruption and delays in issue of planning and construction permits.
Green Clearance:
The Govt. has already announced certain simplification for issue environmental clearance for real estate projects limiting them to 6 to 8 parameters. However, as a further step to increase the ease of doing business in real estate, Real estate projects within major cities, which are covered by a master plan /structure plan/detailed developed plan can be permitted by the approving authority themselves through single window clearance if confirmed to the mater plan/detailed development plan. They need not be treated on par with green field projects and ecologically sensitive projects as cities are meant for people to live/work and play.
Encouragement to green buildings incentives in the form of waiver of approval fees and other benefits may be provided as incentives to encourage green buildings.
Archived provisions like adoption of guideline value or circled status for determining capital gains, tax and deemed income tax on the buyer have been having a big impact and negative pressure on land transactions.
This budget shall categorically remove such pressures as the guideline values have been provisioned. Investment inn improvement of infrastructure like roads, water supply and sewerage in peripheral areas of cities are essential to serve, the developments which are taking place in the outer peripheries of the city. Creation of such infrastructure will also move land for development thus possibly help in bringing down land prices by increasing it supply.

Date: 
Thursday, February 25, 2016