Published & Updated as on - 2010-03-02
IDS National Institute of Real
Estate Management (IDS NIREM) believes that contrary to
the popular demand of and expectation for huge impetus to the housing and real
estate sector, the India budget 2010-11 has brought a mixed bag for this
sector. Though, some benefits have been extended to housing and real estate
sector, the burden imposed will definitely undermine the benefits. The burdens
and benefits for the real estate sector are as
follows:
The burden:
Widening
of Service Tax net:
Real Estate
Developers will have to pay service tax on transactions where consideration is
collected from prospective buyers prior to completion of construction. However,
it seems service tax will not be applicable if the full payment is made after
completion of the construction.
In
addition, other services provided by the builders to prospective buyers such as
providing preferential location or external or internal development charges
(excluding vehicle-parking space) etc. shall also be covered.
Renting
of immovable properties is also under service tax net and the definition of
'renting of immovable property service' has been clarified as well as widened
to cover rent of vacant land under contract for undertaking construction of
buildings or structures for business purposes. This may have negative effect on
to the properties bought or to be bought solely for investment purpose.
Excise Duty on Cement:
Excise
duty ion cement has been increased which will increase the cost of construction
and it is expected that per unit cost for prospective buyers will also
increase.
The benefits:
Some
emphasis has been given to promote housing in general such as:
Extension
of Interest subvention scheme upto March 31, 2011,
Extension
of deadline for completion of pending housing projects by one year without
losing tax holiday u/s 80-IB. However, MAT may affect the companies executing
such projects.
Extension of 1% interest
subsidy on housing loans upto Rs. 10 lakhs and where the cost of the property
is under Rs. 20 Lakhs. This along with along with increase in the tax slab
rates for individuals should provide the necessary demand boost for low-cost
housing.
Relaxation in norms for built-up
area of shops and other commercial establishments in such eligible housing
projects and
Increased budgetary
allocations for urban development and housing schemes.
extension
of investment linked deduction benefit to convention centres located in the NCR
of Delhi extended from the present 31st March, 2010 to 31st July, 2010 (for
purposes of deduction u/s Section 80-ID of the Income-tax Act).
Overall,
this budget will have mixed affect on the Indian real estate sector. However,
looking at the overall economic scenario, we also need to consider that the
budget was presented against mutually conflicting objectives, where-in it is
not possible to meet the demands of each individual sector. Another important
aspect is that very clearly the Finance Minister took pragmatic approach
instead of populist measures, which is a good sign of a growth orientated
government.
Source: www.indiaprwire.com 27/2/10
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