Even as Finance Minister Nirmala Sitharaman prepares to present the Union Budget for the fiscal 2020-21 next month, the National Real Estate Development Council (NAREDCO) on Wednesday sought initiatives to incentivise rental housing in the country.
Speaking to the media here, NAREDCO President Niranjan Hiranandani referred to the concept of "notional income" from housing property held as stock-in-trade, which attracts tax on unsold property after a certain time period under Section 23(5) of the Income Tax Act.
Section 23(5) of the IT Act provides that in respect of unsold property, held as stock-in-trade and not let out, the annual value of the property for the period up to two years from the end of the financial year in which completion certificate is received from competent authority, will be taken as nil. Thereafter, it will be assessable as income from house property on the basis of its notional rent.
"This is an extremely 'subjective' criteria, which will obviously be open for misuse," the NAREDCO statement said.
"This provision is very harsh and is creating genuine hardship to real estate developers, who are already under pressure in the ongoing sluggish market," it said.
"The real estate industry is already struggling with large unsold inventories. Taxing notional rent, after one year from the end of the financial year in which completion certificate is received from competent authority, will lead to severe financial implications for the developer/industry."
The realtors' body also suggested to the government that no rent should be taxed for the period up to five years from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority.
The self-regulatory body, under the aegis of the Ministry of Housing and Urban Affairs, has urged the Finance Minister to demand more measures to ease the liquidity situation in the long-subdued real estate segment, including the one-time roll-over of loans given to developers.
"The industry has been demanding restructuring of loans or one time roll-over in case of the stressed assets at the options of banks. In such cases, the borrower will retain the asset classification of the restructured standard accounts as standard and the same will not be treated as NPA," it said.
It also said that interest rates on home loans should be below 7 per cent per annum and suggested that the stamp duty rates should be reduced by 50 per cent for all the real estate transactions entered and agreements registered on or before March 31, 2020.
The organisation also sought a relaxation in the definition of affordable housing. According to NAREDCO, the Rs 45 lakh price cap for the classification of a property as affordable housing should be done away with as it keeps most of the projects in the National Capital Region (NCR) and the Mumbai Metropolitan Region (MMR) out of the ambit of "affordable housing".