The National Real Estate Development Corporation (NAREDCO), apex body of real estate developers have urged the union finance minister to do away with income tax on unsold flats and demanded MSME status for the industry for access to low interest loan.
The developers’ body have written to the Union Finance Minister Nirmala Sitharaman, requesting to introduce certain changes in the upcoming budget which will help the industry.
It has also recommended phase two of SWAMIH fund for stressed projects and ITC under GST for residential projects ahead of Budget FY25.
“The unsold inventory of any project after two years becomes a liability for the builder as government starts calculating income tax on notional rental income. We have requested the government to either remove it or increase the tenure to five years,” said G Hari Babu, President, NAREDCO.
Under Section 23(5) in case of unsold property, held as stock-in-trade, which is not let out, the annual value of the property after a period of two years post the financial year in which completion certificate was received, will be assessable as income from the property on the basis of its notional rent.
The apex body has suggested the finance ministry to come up with the second tranche of the Special Window for Affordable and Mid-Income Housing (SWAMIH) fund with Rs 50,000 crore corpus in the upcoming union budget for FY 2024-2025, along other budgetary support and relaxations including allowing input tax credit under GST and incentives for rental housing in order to achieve the housing for all target.
Babu said that SWAMIH fund has played a critical role and unlocked liquidity leading to renewed interest among investors, both foreign and domestic in the Indian real estate sector.
As the ultimate beneficiaries of the fund are the home buyers who have been able to take delivery of their long-stuck dream homes, extension of the lending scheme would be a win-win scenario for both the industry and buyers.
The industry body has been requesting for allowing the option of claiming input tax credit by residential project developers with higher GST. In its letter to the FM, NAREDCO said that after the introduction of RERA, accounting has improved with regard to ascertaining the project cost. It said that ITC would also help in enhancing compliance as it would encourage developers to reduce unorganized sector purchase from unregistered persons.
In its letter, NAREDCO, has also suggested several other taxation related amendments including removal of the Rs 2 lakh limit of interest deduction under Section 24 of IT Act 1961 on housing loans in order to boost housing demand.
In a bid to help real estate projects get better liquidity, and relaxations the industry body has also recommended MSME status to projects with the required parameters and also allowing priority sector lending for real estate projects.
Naredco has also suggested measure to promote rental housing.
In view of the housing shortage in the country and the objective ‘Housing for All’ Government in Finance Bill 2021 to promote affordable rental, allowed deduction under section 80-IBA of the Act also, to such rental housing project which is notified by the Central Government in the Official Gazette and fulfils such conditions as specified in the said notification.
Section 80IBA(6) ((da) provides that ” rental housing project means a project which is notified by the Central government in the Official Gazette under this clause on or before the 31st day of March, 2022 and fulfils such conditions as may be specified in the said notification”.
However, many states have adopted such concepts recently and benefit must accrue to entities who intend to promote the aim of the central government.
