Give incentives to developers to make housing more affordable
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One of the sectors that have been severely impacted by the global economic downturn has been the Indian real estate sector. In the past 12 to 18 months, the sector has experienced liquidity crunch coupled with slowdown in demand. Though in the past month or so, there have been some signs of a revival; there is a clear need for the Government to provide additional stimulus to the sector to put it back on the growth path.
In view of demand for affordable housing and Government focus on the segment, there is a need to incentivise developers to meet this demand, which could be well achieved through reintroduction of the tax holiday under section 80IB. Similarly, the period of tax holiday for newly constructed hotels under section 80ID should be increased to ten years from 5 years, keeping in view the long gestation period for hotels. From an indirect tax perspective, service tax on renting of immovable property should be abolished and capital goods for construction should be exempted from special additional duty (SAD) and excise duty should reduced to 4%.
In addition to the lowering of interest rates, some of the measures that should be adopted for infusing liquidity in the sector are re-introduction of 'Tax pass through' status to domestic venture capital funds investing in real estate, placing real estate mutual funds on same footing as equity oriented funds from a income tax perspective, extending external commercial borrowing scheme to entire Indian real estate sector (including Special Economic Zones and not just 100 acre township, hotels, hospitals).
More about Gaurav Karnik
Gaurav Karnik is a senior tax professional with Ernst & Young, India
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