The government is due to present Interim Budget 2019 in Parliament on February 1. For the real estate sector, a slowdown in demand across segments has highlighted many challenges ahead. The real estate sector – which relies highly on borrowings – has faced a slack in the recent past due which in turn has impacted property prices. Many property consultants expect the cash crunch to continue in the real estate sector. Industry body Ficci has said that the government should increase the income tax deduction limit for individuals on interest payment against loans taken for acquisition or construction of self-occupied property.

Such a move should increase the demand for housing, Ficci noted, in its pre-Budget recommendations to the government.

Here are some other recommendations by Ficci for the real estate sector:

Rationalisation of provisions with regard to transaction in immovable property

It is recommended that a different rate of variation may be provided for metro and non-metro cities (say 10 per cent or higher for metro cities and 5 per cent for non-metro cities).

Remove restriction on set-off of loss from house property

The Finance Act, 2017 has inserted sub-section (3A) in section 71 of the Act to provide that loss from house property up to Rs. 2 lakhs only will be set-off against the income under other heads in the same financial year. Loss above Rs. 2 lakhs is eligible to be carried forward for a period of eight years and can be set-off against income from house property only. This provision contradicts with the intention of the government to incentivise housing sector and promote investment in real estate sector.

This could act as a dampener for promoting investment in the housing sector, and should be removed.

Include real estate sector within the purview of Section 72A of the Income Tax Act

Section 72A of the Act needs to be amended to include real estate sector within its purview. This will enable the consolidation and consequential efficiency for the sector.

TDS (tax deducted at source) on payment on transfer of immovable property – Section 194-IA

It is recommended that the requirement of TDS by the buyer on transfer of property be removed or the limit for applicability of TDS be increased from Rs. 50 lakh to Rs. 1 crore.

Period of holding of REITs to be made in line with listed shares

It is recommended that a suitable amendment should be made in Section 2(42A) of the Act to reduce the period of holding to 12 months (as applicable for listed shares) even in case of units of REITs listed on a recognised stock exchange.

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