The top brokerage body, CREDAI, has proposed to the government to increase the tax exemption in the upcoming budget to boost home loans and increase the section 80C income tax deduction for principal repayments on home loans. He also says that there should be a separate exemption for the repayment of the principal on the home loan. The budget for the 2021-22 financial year will be presented on 1 February.
The Confederation of Real Estate Developers Association of India (CREDAI) had recommended tax incentives to promote investment in Real Estate Investment Trusts (REITs). CREDAI has about 20,000 members from all over the country. CRED said: “The real estate sector has been under pressure for more than 2 years. The economic uncertainty caused by the COVID-19 pandemic has taken the sector from bad to worse. After a struggle for survival, CRED said the sector is slowly on track is heading for a revival.”
Ensuring liquidity, access to funds and allowing longer repayment schedules will help developers, the organization said. It called for cheaper home loans and tax breaks on residential investment to boost demand. “It is important to reform the tax on affordable housing, promote joint development and foreign investment,” Credai said.
Under the current provision, the deduction limit for the principal repayment of a home loan is Rs 1,50,000 and this deduction is made along with other tax-saving instruments.
CRED said we are proposing that the deduction under Section 80C for the repayment of the principal of a home loan should be increased from the existing limit of Rs 1,50,000. The deduction for the principal repayment of the home loan can be considered for a separate or stand-alone exemption. The reduction in the principal repayment of the housing loan will encourage home buyers to invest in housing.
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CREDAI proposed to allow investments of up to Rs 50,000 in REITs as a deduction under Section 80C. “REITs are a way to solve the liquidity problem in real estate. At the same time, it offers investors an option to diversify their portfolio. There is currently no provision in them. We have no provision for investments under Section 80 Recommend extension of exemption under C. REITs from Rs.50,000.
Currently, units of REITs must be held for 36 months to qualify for a lower tax rate as long-term assets. “We propose that the eligibility period for units of a REIT as a long-term capital asset should be reduced from 12 months (as applies to publicly traded stocks) to 3 years. This will boost REITs.” and CRITAI said that the units held in REITs at par.
A REIT is a tax-advantaged vehicle that allows property owners to pool income-generating assets in a portfolio and allows investors to purchase property ownership in the form of equity. In India, two REITs have been listed so far.