Mysquare

Heading back to realty

The Real Estate will assume a noteworthy job if Prime Minister Narendra Modi’s objective of nearly multiplying the size of the economy to $5 trillion is to be a reality. The property showcase has been under serious worry in the grasp of recurrent doldrums where supply is adequate, while the offload is repressed. This circumstance has hit designers seriously driving numerous engineers to be trapped in an extreme money crunch and incapable to support the significant expense of obligation.

Further, default by one of the nation’s biggest infrastructure lender two years ago has caused a chain effect of credit showdown and has caused the credit market to cramp up. Lenders are also not allowing builders to withdraw the sanctioned loan limit. Builders are mired in debt and unable to secure funding to complete projects as promised.

With corporate tax rate reduced to 22% for non-manufacturing sector and the setting up of a Rs 25,000 crore fund to salvage stalled residential projects already announced in 2019, the real estate sector had high expectations ahead of the Budget.

Due to the stress that the real estate industry is currently going through, there are lots of transactions where the consideration may be below the stamp duty value. This is purely on account of genuine business cases without any intention to avoid tax. Substitution of stamp duty value in such transactions has been creating unnecessary hardship for parties to consummate the transaction.

Acknowledging the hardship, Union Budget 2018 had provided that no adjustment shall be made in the transaction value where the stamp duty circle rate does not exceed more than 5% of the transaction value.

Realizing that the 5% figure is not significant enough and has not addressed the difficulty faced in transactionsBudget 2020 has proposed to increase the rate to 10% of the transaction value. This is are welcome amendment and should give some fillip to transactions on the borderline.

Further, to address liquidity constraints of NBFCs / housing finance companies, the government had formulated a Partial Credit Guarantee scheme for NBFCs. To further this support of providing liquidity, Finance Minister has announced in Budget 2020 that a mechanism would be devised whereby the government will offer support by guaranteeing securities so floated. No further details have been provided in the Finance Bill with regards to the same.

Further, in accordance with the government’s plan to give housing to all by 2022, the Union Budget has proposed to extend as far as possible for endorsement of affordable housing for availing tax occasion advantage of 100% benefits got from business of developing and building moderate residential properties, by one year to 31 March 2021.

Further, to boost first time purchasers to put resources into residential house properties, Budget 2020 has proposed to extend the date of loan sanction for availing the additional deduction of interest of Rs 150,000 has been proposed to be reached out by one year to 31 March 2021. These moves should to give flexibility to the reasonable housing sector.

Budget 2020 has also proposed that where cost of acquisition of land or building (held as a capital asset) acquired prior to 1 April 2001, stamp duty value of such land or building shall be its fair market value. This proposal will reduce the litigation on the computation of fair market value.

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