Union Budget 2021 India: The Confederation of Real Estate Developers' Associations of India (CREDAI), which has around 20,000 members from across the country, also recommended tax incentives to boost investment in Real Estate Investment Trusts (REITs).
Indian Union Budget 2021-22: Realtors’ apex body CREDAI has suggested the government to increase tax exemptions in the upcoming Budget to boost housing demand and enhance limit of deduction under section 80C of income tax for principal repayment on home loans. It also said that there should be a separate exemption for principal repayment on home loans.
The Budget for financial year 2021-22 will be presented on February 1. The Confederation of Real Estate Developers’ Associations of India (CREDAI), which has around 20,000 members from across the country, also recommended tax incentives to boost investment in Real Estate Investment Trusts (REITs).
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“Real estate sector has been under stress for more than 2 years. Economic uncertainty enforced by COVID-19 pandemic has only made it worse for the sector. After battling for survival, the sector is slowly moving towards revival,” CREDAI said.
The association said that ensuring liquidity, access to funds and longer repayment cycles will help developers. It sought cheaper home loans and tax benefits on investments in housing to boost demand.
“Reforms in taxation related to affordable housing, joint development and steps to promote foreign investment are the need of the hour,” CREDAI said.
As per the present provision, the ceiling of deduction for principal repayment of housing loan is Rs 1,50,000 and the deduction is clubbed with other tax saving instruments.
“We suggest that the deduction under section 80C for principal repayment of housing loan should be increased from existing limit of Rs 1,50,000. The deduction for principal repayment of housing loan can be considered for a separate or standalone exemption,” CREDAI said.
An increase in deduction for principal repayment of housing loan will encourage the home buyers to invest in homes, it said. CREDAI suggested that investment of up to Rs 50,000 in REITs should be allowed as deduction under Section 80C.
“REITs are one way of solving the liquidity problem in real estate. At the same time, it offers the investors a choice to diversify their portfolio. At present, there is no provision. We suggest an extension of exemption under section 80C to investments in REITs starting with Rs 50,000,” it said.
Currently, units of REITs need to be held for 36 months to make them a long-term capital asset eligible for lower tax rate. “We suggest the period of holding for units of REITs to qualify as long-term capital asset should be reduced to 12 months (as applicable for listed shares)…in place of 3 years. This will lead to faster adoption of REITs and bring the units held in REITs at par,” CREDAI said.
REIT is a tax-efficient vehicle that enables owners of real estate to pool income-generating assets together in a portfolio and allows investors to buy ownership in real estate assets in the form of equity. In India, two REITs have been listed so far.