#Budget2017: To Push Affordable Housing, Govt Must Tax It Like A Basic Necessity Under GST
Project delays are counted among the major causes that earned India's real estate sector a bad name, and led to a slowdown in the market beginning 2014. Since the sector happens to be the second-biggest employment generator of the country and a slow growth here could adversely impact India's overall economic growth, the Prime Minister Narendra Modi-led government at the Centre initiated major steps to bring about a revival. Key legislations were passed — this includes the Real Estate (Regulation & Development) Act, 2016, the Goods and Services Tax Constitutional Amendment Bill and the Benami Transactions (Prohibition) Amendment Bill, 2015. Large-scale infrastructure projects were announced — Smart City Mission, the Housing for All by 2022 Mission and the Swachh Bharat Mission. The real estate sector has also remained a focus area of the Modi government's Budgets — tax sops were announced to push affordable housing, a segment that sees can make or break things as far as home sales are concerned.
Real estate developers, too, did everything to bring passive buyers back to the market.
According to PropTiger DataLabs, property prices across major cities of the country have witnessed no uptick in the past three years. Also, new project launches fell across cities as developers shifted focus to completing their on-going projects. Innovative discount offers were launched to make deals look more lucrative. Reduction of interest rates by the Reserve Bank of India and cut in stamp duty charges in some states were also some steps that were taken with an aim to revive the sector.
But, right when we all thought things were looking up, PM Modi announced his government's decision to ban currency notes of high value on November 8, and things were back to where they started as far as home sales were concerned.
At a time like this, real estate developers are expecting Finance Minister Arun Jaitley to announce measures that would start showing results with immediate effect. The finance minister will present the Union Budget on February 1. Among other things, developers are expecting the finance minister to keep the affordable housing segment under the five per cent tax slab when the GST regime is rolled out. When the new regime comes into force, services will be taxed between 5 to 28 per cent, with 12 per cent and 18 per cent as standard rates; reports say the government plans to keep the housing sector under the 12 or 18 per cent tax slab.
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Missing its previous deadline of April, the GST regime is likely to be rolled out from July this year now.
"Roti (food), Kapda (clothing) and Makaan (housing) are the basic necessity of a common man. Considering that, the government should treat them as essential items and tax them accordingly. By charging GST at the tax slab of five per cent, the lowest bar set by the government earlier for essential items, the Centre would not only make property more affordable for the common man but also help bring down the total cost of property, which has gone substantially up in the past decade," says Ankur Dhawan, Chief Business Officer-Resale, PropTiger.com.
To battle these taxing times, tweaking taxes in favour of the sector could be a good start.
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