The Modi Government has been ushering in key initiatives to drive India’s economic growth and social welfare over the last few years. Given the recent increase in liquidity in the banking system, the government now has more breathing space to provide benefits from a taxation perspective. We could see some relaxation in the tax rates for salaried individuals across income slabs which is increasing the buying capacity of an individual. The initial benefit of the increased liquidity has already been passed on by the banks by reducing home loan rates in the beginning of the year.
On the home loans front, tax deduction limit for home loans should be increased, especially in metro cities like Mumbai. The current limit of Rs 2 lakh is very low in the context of ticket sizes being priced upwards of approximately Rs 1 crore. Also, it remains to be seen whether the tax exemption provided to first time home buyers in the last budget (units costing less than Rs 50 lakh with loan amount less than Rs 35 lakh) will be extended in the upcoming budget.
From a more macro perspective, since the last five years several key industry bodies have urged the government to give industry status to the real estate development sector. We are hopeful to see a positive outcome in the forthcoming budget
. Secondly, any last key hurdles in the implementation of REITs should be put to rest paving the way for transactions materializing in the coming year. Lastly, with the aim of providing more comfort to private equity players, the government should offer easy exit norms from projects.
While the implementation date for GST and its tax structure have been announced, more details on the applicable rate for the real estate and construction industry are still being widely discussed. Lastly, more clarity is needed on how the new corporate tax rate of 25% will be phased in. Overall, we wish that the FM announces a budget which is balanced in its approach towards both Indian citizens and corporates.
The author, Mr. Kamal Khetan is Chairman and Managing Director, Sunteck Realty Ltd.