#Budget2017: 4 Game Changers For Real Estate
February 03, 2017 | Shaveta Dua
The reforms proposed by Union Finance Minister Arun Jaitley while he presented the Union Budget 2017-18 on February 1 are aimed to aid the real estate sector. The finance minister, in his Budget Speech, announced incentives for homebuyers, investors and developers alike. These sops will give a new lease of life to the property market.
Impetus to affordable housing
With a transformative shift in the approach of the government, "poor" and "infrastructure" have become the new buzzwords. Thus, the government, in the recently announced Budget, has given a strong push to the affordable housing segment by giving it the infrastructure status. This move will directly enhance the resource allocation for the sector by way of cheaper foreign funds and will be a priority lending for banks as well.
In another announcement that could give a leg-up to developers is the permission to complete affordable housing projects in five years instead of the existing three years of timeline and at the same time be eligible for tax exemption under section 80IB of the Income-Tax Act.
The government will also allow developers to keep their unsold inventory up to a year without attracting any income-tax liability. This will also help developers deal with their 'stock-in-trade' accordingly.
The move to measure the areas in affordable housing projects — 30 sq mt for the projects in municipal limits in the four metros, and 60 sq mt for the rest of India, on carpet area as against the earlier built-up area, will translate into 30 per cent larger homes. This should amplify the interest of developers further to build more affordable projects.
Shrinking of holding period
To qualify for long-term capital gains (LTCG) status, the government has shrunk the holding period by a year from previously three years to now two years. The move is expected to benefit investors in real estate.
The base year of LTCG indexation will also be shifted from April 1, 1981 to April 1, 2001, for all classes of assets, including immovable property. "This will further bring down the capital gains and subsequently the taxes on the capital gain," says chartered accountant Manjeet Chahal.
Tenant to deduct TDS on rent
Under the new set of reforms proposed for the next financial year, if anyone is paying rent in the excess of Rs 50,000 a month then he would be required to make tax deduction at source (TDS) at the rate of five per cent while making the payment to the landlord. For instance, if your monthly rent is Rs 52,000, you would deduct Rs 2,600 (five per cent of Rs 52,000) and pay Rs 49,400 to your landlord. But, the TDS collected by the tenant can be deposited in one go for the whole fiscal.
Rented properties bought via home loan
Till now, a home loan borrower could claim tax deductions under Section 24(b) against interest paid on a home loan. If the property is given on rent, the entire interest paid on a home loan can be claimed as a deduction. Under the new law from the next fiscal, the tax deduction due to interest paid on rented-out properties, which are bought on loan, will be capped at Rs 2 lakh.
However, any extra interest above Rs 2 lakh can now be set-off in the next eight assessment years.