With a series of revolutionary moves like Regulation and Development Act (RERA), Demonetization, Goods and Services Tax (GST), the past 16 months proved to be completely action-packed for India’s realty sector. Reeling under a slump from quite some time, the sector was hoping for a revival in the Union Budget 2018-19.
Industry experts at Swadesh Builders, Nitin Agrawal Bhopal-based realty player, state that the sector had high expectations from the new budget as it was the first major move after the implementation of RERA and GST. However, the much-awaited budget clearly gave the realty sector a miss. There are no direct incentives for it.
The long-standing demands for relief measures like lower taxes and infrastructure status and single-window clearance have still not been met in the Budget ’18. With high hopes on Budget 2018-19, industry experts were expecting rationalization of GST rates from the current 12 per cent to 6 per cent. Swadesh Builders MD, Nitin Agrawal believes that these measures would have highly benefited the country’s real estate sector.
The new budget holds that no adjustment shall be made wherein the circle rate value does not exceed 5 per cent the consideration.
Finance minister Arun Jaitley said, “Currently, while taxing income from capital gains, business profits and other sources in respect of transactions in immovable property, the circle rate value, whichever is higher, is adopted and the difference is counted as income both in the hands of the purchaser and seller… Sometimes, this variation can occur in respect of different properties in the same area because of a variety of factors including shape of the plot and location.”
“In order to minimize hardship in real estate transaction, I propose to provide that no adjustment shall be made in a case where the circle rate value does not exceed 5 per cent of the consideration,” he added.
This move has got mixed reaction from the sector.
“The move of the 5 per cent deviation from circle rates to remove hardship is not enough, as in many cases the actual deviation of circle rates to prevailing market is as high as 30 per cent,” Nagaraju Routhu, CEO, Hero Realty from Delhi said.
Abhishek Bansal, Executive Director of Pacific India Group, however, said: “Though there is not much in terms of addressing the problems faced by the realty sector but the move towards no adjustment in case of the circle rate not exceeding 5 per cent of sale consideration is a welcome move.”
“Standard deduction for transport, medical reimbursement for salaried taxpayers and incentives for senior citizens will help increase disposable income at hand (hence raising the demand),” he added.
Calling the budget balanced, but not a boon for real estate, Anuj Puri, Chairman, Anarock Property Consultants, Maharashtra said, “If the circle rate does not exceed 5 per cent of transaction value, no adjustment is required towards the capital gains on a real estate transaction… It will help in terms of some extra savings if there is parity between the market rates and the ready-reckoner rates,” he said, adding that, “cities which are not under the heavy influence of real estate investors and where prices are rational may benefit from this announcement.”
Certainly, Budget ’18 has overlooked various grey areas in the real estate sector is quoted by Nitin Agrawal Bhopal. This makes it unbalanced to a great extent.