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Give Big Push to Housing in the Budget : PHD CHAMBER

New Delhi, Feb 08, 2010

Housing is a significant engine of growth and development for the economy and the government needs to give a big push to the sector in the forthcoming union budget according to the PHD Chamber. The multiplier effect of investment in housing positively impacts the development of over 250 other ancillary industries and also generates huge employment opportunities.

In a detailed memorandum submitted to the government, PHD Chamber has asked for the definition of infrastructural facility to be broadened to explicitly include integrated township development, including housing, under section 80 IA of the Income Tax Act.

Under section 80 IB (10), which provides a tax holiday in respect of the profit derived from housing projects, the cut-off date for eligibility needs to be further extended and the tax holiday eligibility, based on project completion condition, should be restored according to the PHD Chamber.

PHD Chamber has also suggested that all slum redevelopment projects should get tax, both direct and indirect, incentives to achieve the objective of the government to make India slum free in the next 7 years.

For incentivising individual investment in housing, PHD Chamber has suggested that the holding period to qualify as a long term capital asset should be reduced from 3 years to 1 year in case of immovable properties. Standard deduction in lieu of expenses available for the income chargeable under the head “income from house property” should be increased from the present 30% to 50% of annual value. Alternatively, depreciation should be made allowable as a deduction from the rental income along with the 30% standard deduction. Under sections 24 (b) and 88 (xv), deductions on interest and principal loan repayment should be enhanced from Rs. 1.5 lakhs to Rs. 3 lakhs and from Rs. 1 lakh to Rs. 2 lakhs respectively. Entire interest deduction should be allowed on funds borrowed for acquisition / construction of self occupied residential house property for affordable housing category.

This would provide relief to the middle class, besides increasing disposable income in their hands by increasing this deduction and encourage people to have a house of their own. The gain arising from the transfer of house property, being long term capital asset, should be reduced from 20% to 10%, under section 112, according to the PHD Chamber.

For promotion of rental housing, PHD Chamber has suggested that income from renting of properties should be taxed at a flat rate of 10%, depreciation allowance of 50% should be allowed on investment made by employers in employee housing - 100% in case of employee housing with plinth area of less than 500 sq. ft.. To improve the effective rate of return from renting, the deduction from rental income under section 24 should be increased from 30% to 50% - for women and senior citizens, the deduction could be 100%.

Currently, exemptions are available from service tax to specific infrastructure projects like road, airport, etc. under specific taxable categories. In order to boost the projects of strategic importance and provide affordable housing to lower middle income groups, PHD Chamber has recommended that similar exemptions should be extended to hospitals, schools, housing for economically weaker sections, etc. under all relevant categories. Further, end use based exemptions from excise and customs should be extended for procurement of raw material and capital goods for such projects.

Innovative housing finance strategies and policies encompassing micro finance, interest subsidy and mortgage guarantees to help poor to get shelter and concession to private sector developers for project viability is necessary according to the PHD Chamber. The government should extend interest subsidy @ 2% on all the housing loans up to Rs. 35 lakhs taken after 1st March 2010. The subsidy should be allowed for a period of 15 years, to be automatically adjusted against the interest payment by the borrower.

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