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Will The Budget 2018 Grant You A Home?



Budget 2018

The Budget 2018 brings a lot of hope for the real estate industry as the past year brought revolutionary changes which are now showing a positive impact on the builders and customers alike. The Union Government has ‘walked the talk” on some measures announced in the previous budgets, and now people are hopeful that the new budget will help take things to the next level.


Following are the expectations this year:

Houses on Rent

When compared to the developed world, India’s share of rental housing in total urban housing stock is considerably low. Migration is unavoidable with the Indian economy poised to grow at 8-9 percent per annum and huge job opportunities in urban areas. Thus more rental housing stock is needed to deal with the looming housing shortage in Urban India and we hope the Budget will be conducive to the same.

Industry Status

Standard Deduction

At present Standard Deduction allowed is 30 percent of the Net Annual Value of the house property. NAREDCO has appealed to increase the deduction from 30 percent to 50 percent to boost the demand.


Deduction of Interest on Home Loan

In case one takes a home loan for the purchase, construction, repair, renewal or reconstruction of one’s house property – the interest is allowed as a deduction from the Net Annual Value. Deduction for interest on money borrowed is allowed on an accrual basis. The total amount allowed towards this deduction is Rs 2,00,000 beginning assessment year 2015-16.


In case of a let out or a deemed to be let out property, the entire interest was allowed as a deduction under Section 24 of the Income Tax Act till FY 2016-17. From FY 2017-18 deductions for interest on let out the property was allowed only up to Rs 2 Lakh; which NAREDCO recommends to bring back original deduction under SEC 24 of entire interest amount.

Removal of Taxing Notional Rent

The Section 23 of Income Tax Act is directly in conflict with aspirations of the Prime Minister to create Housing For All as it disincentives the developer from producing surplus Housing Stock. The provision penalizes developers who complete the project on time but cannot sell units due to the market scenario or inevitable economic circumstances and put these apartments on the rent, income from which is offered to tax.


Thus entities engaged in real estate business should be exempted from the burden of tax on notional rent income. Also, the government can look upon extending the period of 1 to at least 5 years or government may give credit for tax paid on notional income at the time of actual sale of the property if above case is not possible.

Rationalisation of GST

Rationalisation of the tax structure with a uniform level of rates is what the real estate sector is hoping for. The real estate industry has urged the government to cap goods and services tax (GST) rate across the real estate sector to 6 per cent with Input tax credit, to help boost demand for housing. The abatement for the land cost to 50 per cent, from the existing 30 per cent is also expected.


Thus it is safe to conclude that if the finance minister makes housing, infrastructure, and construction key issues for the Budget to focus on, the multiplier effect on the economy will be tremendously helpful. Single window clearance system in place to expedite approvals, ease of doing business policies and Infrastructure boost for perennial job creation is mandated for economic growth traction.

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