Fiscal Incentives & Waivers Expectations from the Budget

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Radha Dhir, CEO & Country Head, India, JLL Fiscal incentives for net-zero buildings: Providing tax rebates and other fiscal incentives to develop net-zero buildings would help encourage energy efficiency and combat climate change. Special tax status for data centre parks: India’s draft Data Centre park policy aims to make India a ‘global data hub’. Since Data centre is a capital-intensive industry special tax concession should be granted for data centre parks which can help in attracting more investments. Increased allocation for SWAMIH fund: The progress of the Special Window for Affordable & Mid-Income Housing (SWAMIH) fund in achieving the objective of completion of stalled projects is bearing results, the allocation for the fund should be increased further. The Government should float similar funds for rental housing projects. Accord 'Industry status' to the real estate sector: While the Government has already provided ‘infrastructure’ status to affordable housing, the long-standing demand of according ‘industry’ status to the overall real estate sector remains unfulfilled. The growth of the real estate sector has its linkages and impact on multiple sectors and hence warrants an integrated approach for holistic and sustainable development. Since the sector has already witnessed landmark structural reforms resulting in increased transparency, accountability, and efficiency, granting of ‘industry’ will further fuel investment and employment. Separate provision for deduction of 'principal repayment' on home loans up to INR 2 lakh: A separate provision allowing deduction of principal repayment (currently forming part of 80C deduction) up to INR 2 lakh would provide homebuyers higher tax benefits towards the latter stage of the loan tenure. This could be a timely relief in the current scenario where several homebuyers are grappling with honoring financial commitments. Removal of restriction on setting off the loss from house property against other heads of income: The Finance Bill, 2017 introduced provisions to restrict the set off the loss from house property against other heads of income during the year. The existence of this restrictive clause severely dampens the investment sentiment in the housing market owing to lower effective post-tax returns. The removal of this restriction will enable the individual to claim the entire interest on his let-out property without any limit, resulting in a higher effective post-tax return on property purchase. This is expected to spur higher investments in the housing sector, at a time when developers are reeling under tremendous stress to push their inventory and generate sufficient cash flows for business sustenance. Reduction in holding period of REITs for long-term capital gains: The success of three listed REITs has opened a new avenue for retail investors. Since REIT units are like listed shares, the capital gains tax treatment should be aligned by reducing the holding period from three years to one year. This will improve liquidity and help to increase retail participation. Further, a reduction in the holding period will provide REITs a level playing field with competing equity instruments. Allow 100% FDI in completed residential real estate projects through the automatic route: Presently, 100% FDI is allowed through the automatic route in under-construction residential projects only. The move to permit FDI in completed residential projects will aid in unlocking the capital held up in unsold inventory, thereby rescuing cash-strapped developers. This is likely to lay a foundation for institutionally owned residential housing assets in India. Allowing input tax credit on the calculation of GST payable in real estate: The government has reduced the GST burden by rationalising the effective rate on residential housing projects. But the unavailability of Input tax credit (ITC) to developers has resulted in a minimal reduction in prices to the home buyers, largely offsetting the GST reduction measure. If the ITC is restored it can help developers to pass on the tax benefit to homebuyers. Similarly, ITC should be allowed on the development of commercial real estate properties meant for leasing purposes. As per Section 17(5) of the Central Goods and Services Tax Act, the input tax credit is not allowed to be claimed on the GST payable on rental income. The disallowance of ITC has thus led to higher cost of construction, blockage of working capital and adversely impacting cash flows of developers. Increase limit on interest deduction under section 24(B) for tax rebate: The home loan interest deduction should be increased from INR 2 lakhs to INR 4 lakhs for tax rebate under section 24(B). This will effectively improve the savings of the home buyer and aid them in the home buying decision. Extension of benefit u/s 80EEA to avail additional INR 150,000 interest deduction on home loans for first-time homebuyers: This benefit (currently available for home loans sanctioned till 31st March 2022), may be extended until 31st March 2024. This will continue to benefit first-time homebuyers. Considering that most homebuyers fall in the lower and mid-income segments, this tax benefit will boost demand substantially. This will significantly benefit first-time homebuyers who will enjoy the benefits of interest subvention under the CLSS scheme and the extended tax benefits at a time when home loan interest rates are at their lowest and developers are offering lucrative deals. Tax deduction on profits from affordable housing projects to be extended until March 2024 u/s 80IBA: A three-year window of extension would help the developers to construct affordable housing projects and boost the “Housing for All” objective. Since the launch of new affordable housing projects were severely impacted during the pandemic period, an extension of the scheme will help developers to start new projects. A special authority should be set up for monetisation of surplus land by Government companies / public sector enterprises: Though the government has announced plans to set up National Land Monetisation Corporation (NLMC), concrete action in this regard would further help to monetise state-owned surplus land in a systematic way. Extension of Credit Linked Subsidy Scheme (CLSS): The Credit Linked Subsidy Scheme (CLSS) and the timeline to avail its benefit under the Pradhan Mantri Awas Yojana for Middle Income Groups may be extended until the budgetary allocation is not utilized.