By Gaurav Karnik
As the pandemic engulfed the Indian economy in the early part of 2020, there was a severe impact on the housing sector. Since the lifting of the lockdown, there have been few green shoots in the residential segment. These have been facilitated by cuts in stamp duty rates by states, such as Maharashtra, and interest rates for housing being at historic lows. Keeping the government’s stated objective of Housing for All by 2022, a sub-segment that has and will need attention in the forthcoming budget is affordable housing. In this connection, it is suggested that the last date for availing the Pradhan Mantri Awas Yojana (PMAY) Credit-Linked Subsidy Scheme (CLSS) both for the MIG-I and MIG-II categories be extended to March 31, 2022, as is the case with the scheme for LIG/ EWS category.
The period for availing the additional deduction of up to Rs 1.5 lakh for interest paid on loans borrowed for the purchase of an affordable house valued up to Rs 45 lakh, should be extended to March 31, 2022, and, at the same time, increase the value of houses eligible for such deduction from Rs 45 lakh to Rs 90 lakh, especially in the metro cities. To sustain the housing demand, the Centre should consider extending benefits under centrally sponsored schemes such as the Jawahar Urban Renewal Mission to States which reduces stamp duty rates or reduces local levies on the housing segment especially with respect to affordable housing. Further, the tax holiday under Section 80IBA of the Act should be extended to projects approved up to March 31, 2023 as meeting the current deadline of March 31, has been severely impacted by the pandemic.
Given the liquidity issues in the sector, landowners have been entering in collaboration agreements. Accordingly, provision of capital gains arising from the transfer of development agreements being taxable in the year in which completion certificate is issued should be extended to all taxpayers including corporates and not be limited to individuals and HUFs.
Further section 23(5), which provides for taxation of property that remains unsold for two years from the financial year in which completion certificate is obtained on a notional basis, should be deleted to reduce developers’ financial burden with large amounts of unsold inventory.
Deduction currently available under Section 24 of up to Rs 2 lakh for interest on loans availed for acquisition/construction of self-occupied house should be increased to at least Rs 5 lakh per annum. In addition, the limit on losses under the head house property available to be set off against income of any other head of Rs 2 lakh should be either be removed or increased to Rs 5 lakh pa. Simultaneously, given that migrant workers have gone back to their residences during the pandemic leaving houses vacant, the provisions relating to attribution of notional income to vacant properties should be relooked.
The housing sector is extremely important from a contribution to GDP as well as employment perspective. Accordingly, the governments continued support to the sector will be most welcome as the Indian economy looks to recover from the pandemic in the next few quarters.
The author is Partner and National Leader, Real Estate, EY India.Views are personal