CREDAI demands tax sops for Budget 2021-22

Confederation of Real Estate Developers' Associations of India (CREDAI) has demanded an increase in tax exemptions in the upcoming Budget 2021-22 to boost housing demand and sought enhanced limit of deduction under section 80C of income tax for principal repayment on home loans. As per the prevailing provision, the ceiling of deduction for principal repayment of housing loan is ₹1,50,000 and the deduction is clubbed with other tax saving instruments. The demand suggested that the deduction under section 80C for principal repayment of housing loan should be increased from the existing limit and the deduction for principal repayment of housing loan can be considered for a separate or standalone exemption. This will encourage home buyers to invest in the housing sector. The body said that there should be a separate exemption for principal repayment on home loans and also recommended tax incentives to boost investment in Real Estate Investment Trusts (REITs). Real estate sector has been under stress for more than 2 years for various reasons including economic uncertainty enforced by the COVID-19 pandemic. After battling for survival, the sector is slowly moving towards revival. The association informed that ensuring liquidity, access to funds and longer repayment cycles will help developers. It also sought cheaper home loans and tax benefits on investments in housing to boost demand. Reforms in taxation related to affordable housing, joint development and steps to promote foreign investment are the need of the hour.

CREDAI also suggested that investment of up to ₹50,000 in REITs should be allowed as deduction under Section 80C. "REITs are one way of solving the liquidity problem in real estate. At the same time, it offers the investors a choice to diversify their portfolio. At present, there is no provision." Units of REITs need to be held for 36 months to make them a long-term capital asset eligible for lower tax rate. "We suggest the period of holding for units of REITs to qualify as long-term capital assets should be reduced to 12 months (as applicable for listed shares) in place of 3 years. This will lead to faster adoption of REITs and bring the units held in REITs at par." REIT is a tax-efficient vehicle that enables owners of real estate to pool income-generating assets together in a portfolio and allows investors to buy ownership in real estate assets in the form of equity. In India, two REITs have been listed so far.