Take steps to promote home ownership, widen scope of Affordable, Rental Housing

New Delhi, Jan 28, 2022: National Real Estate Development Council (NAREDCO) presented its recommendations for the upcoming Union Budget 2022-2023. In its list of recommendations, NAREDCO has urged the Government to bring in provisions to promote homeownership and affordable and rental housing, and also support the development firms. 

Rajan Bandelkar, National President NAREDCO said, “The Government has been supportive ever since the start of the pandemic. While it has taken up a pro-growth stand, there is a need to keep the guard up and continue the support offered to the sector.”   

Currently, u/s 24(b), interest on borrowed capital to acquire a house for rental purposes is allowed in full. However, in the case of self-occupied houses interest is restricted to Rs 2 Lakhs. This limit is too less and should be increased to at least Rs 5 lakhs to promote the ownership concept, said NAREDCO. “The completion of construction is not in the hands of the assessee and hence the buyer should not be subjected to uncertainty just because the developer /builder delays the completion,” said Bandelkar.

Moreover, the interest is allowed in the year after completion. “The condition prescribed means the assessee is precluded from the claim of interest during which he may be paying interest as well as rent of the house he may be staying during this construction stage hampering his cash flow,” added Bandelkar.

Hence, the scope of affordable housing projects receiving 100 per cent deduction of the profits and gains derived from the business of development and building housing projects u/s 80 IBA of Income Tax, 1961-2018. “There has been a change in provisions of this section w.e.f from 01.09.2019. Housing Projects are approved between 01.06.2016 to 31.03.2022. Hence, Section 80IBA (2) (a) be amended to provide benefit to all the projects registered with RERA between 1st June 2015 till 31st March 2023. Moreover, to promote affordable housing the deduction should be extended to all projects registered with RERA, provided they meet other requirements,” Mr Jain added.

Moreover, the time frame for the completion of the project in u/s 80IBA(2)(b) should be increased from five years to seven years. “Previous two years have been very difficult due to Covid 19 pandemic. Hence we request the government that the time limit of five years be increased by two more years,” said Parveen Jain, Chairman, NAREDCO.

The statement also added that the country’s housing shortage can be tackled with the growth of new housing formats, including rental housing. The rental housing market should be incentivised to meet the ‘Housing for All’ Commitment of the government. Factoring in the need to promote rental housing in the country, NAREDCO has also recommended increasing the approval timeframe of affordable rental housing projects under section 80IBA (6)(da).

Section 80IBA (6)(da) provides that ‘rental housing project’ means a project which is notified by the Central Government in the Official Gazette under this clause on or before the 31st day of March 2022 and fulfils such conditions as may be specified in the said notification. “However, the country has just begun to formalise a rental housing framework in the country. The rental housing policy is not yet final across several states. Hence, to incentivise the developers of rental housing projects, the time limit of approval should be increased by at least five years,” said Dr Niranjan Hiranandani, Vice Chairman, NAREDCO.

In addition to this, NAREDCO has urged the government to treat the units of Real Estate Investment Trusts equivalent to listed entities for direct tax computation.