Make real estate deals more transparent

The success story of the booming real estate market in India coupled with strong economic growth have spelt good news for the country. Nonetheless, reforms are necessary. Reforming the real estate sector in this budget will add to the success story of the country. So this budget, the Government should further reform and tighten norms for the real estate sector to protect the interests of the investors. This will encourage the actual homebuyers and NRIs who are looking to invest in India. Certain reforms are needed to ensure housing at affordable prices to appeal to the masses. The developers and builders in India have been having a field day with no control over built up and carpet areas, illegal property documents and constructions, possession related issues and other illegal entanglements. In Mumbai, rules and regulations for re-development of old buildings and the slum rehabilitation should be made more lucrative for investors and builders.Our expectations from the budget with respect to the real estate sector are as follows:1. Section 80 IB of the Income Tax should resume. This act gives tax relief to the builders who construct units less than 1000 square ft built up in metros. However, the benefits under this section have been stalled since last year. A lot of builders have created houses under this scheme and consumers are benefited through the mass construction. The only problem here is that while the builder gets tax relief there is nothing passed onto the consumer. A majority of home buyers are unaware of this tax respite which the Government had given to the builders. The Government should continue giving this subsidy to the builders as this will encourage them to make more affordable homes. This will also be in line with the Government's 10th Plan estimate where the shortage of housing units is expected to be in the range of 22.4 million square ft. This benefit is the need of the hour but with some rider that the benefit is mandatorily passed on to the consumer.2. Under Section 24 of the Income Tax, the exemption of the interest on home loans should go up from the present Rs 1.50 lakh to atleast Rs 3 lakh. This is keeping in mind the average size of the apartment price has grown 200% over the past few years. Also, the tax benefit should be given from the date of booking of the property and not from the possession.
3. Tax deducted at source (TDS) on housing rental income for individual home owners should be brought down from 16.83% to 10%. A flat slab of 15% or a tax holiday of initial 3 years should be considered on rental income for NRIs. This will boost NRI investment into the country or else they'll look towards other countries for returns on their investment. Also, this will rationalise the prices of rentals in many metros and more people will be willing to rent out properties. A lot of NRIs lock up their apartments for fear of an upfront deduction of TDS of more than 30%, which affects return. Further, a standard deduction of 30% towards maintenance should be increased to 40% for local residents and 50% for NRI houses.4. Stamp duty charges should be reduced to 2.5% from the current 5% as it will benefit the property buyers.5. The interest given on bonds should be linked to bank interest rates on fixed deposits. This is extremely helpful to elderly in ensuring their safety for future. A lot of property owners still are conservative and prefer to invest their money in capital gain bonds and earn a living out of them.

6. The buyers should be allowed to invest in residential properties from the sale of commercial properties and purchase residential properties with the money recieved from the sale of commercial properties. Buyers should also be allowed to invest in both commercial and residential properties from the proceeds of one single property.
7. The Government should take more steps to curb money made illegaly in the land deals. Cheque transactions will automatically yield in more money flowing out of bank accounts than from hidden lockers.8. Presently, not many builders are making one Bedroom-Hall-Kitchen (BHK) apartments. The builders should be given incentives to build one BHK of less than 400 square ft carpet area particlaurly in Mumbai.
9. Fringe benefit tax (FBT) for corporate employees who rent properties should be reduced from the current 20% to 5%. This is because they already have an option to get into an individual lease without paying FBT. 10. Individuals, companies and employees of multi national companies should be given 100% tax exemption for the rent paid towards renting a house on leave and license/lease basis. This will help people make a decision to lease the properties and avail tax benefits if they cannot afford to buy the properties. 11. Tax incentive should be given to owners renting out their properties for a minimum lock-in period of 3 years with no right of termination to either the landlord or the lessee, and a built in fixed escalations in the rent price. This will encourage people to change houses once in 3 years. 12. Floor Space Index (FSI) should be increased within city limits with immediate effect to bring down real estate prices. Also, builders should be strictly made to create the required infrastructure to meet the demand for water, electricity, parking and sewage system by using innovative and latest methods available.14. The Coastal Regulatory Zone (CRZ) should be further rationalised as a lot of prime properties are stuck because of this.15. Incentive in the form of higher FSI should be given to builders who re-develop housing societies because the prices of real estate are unaffordable.16. Buyers of real estate should be allowed to exit/sell after a span of two years with a lesser tax slab so that it becomes easier for them to exit. This will curb the black money movement in the market. An artificial shortage of property is created and prices are hiked because the sellers are unable to sell within a short span and also because they pay higher tax.

17. Real estate brokers / agents should be given proper licensing to practice real estate business. By doing so there will be a decline of unscrupulous transactions.
18. Benefits to be given to developers who adopt area management schemes in and around their complexes for beautification and development of the area and keeping the location neat and clean.19. The Government should manadate ratings to property developers. A regulatory body should keep a vigil on the activities of builders who create smaller dwellings of less than 100 units a year.20. An code of ethics should be cerated for real estate developers and agents to help them offer better professional services.21. Property taxes should be rationalised for leasing both residential and commercial properties.22. Information Technology (IT) and Information Techonology enables services (ITes) benefits with respect to Software Technology Parks of India (STPI) should continue but with lesser rigid regualtion.23. Commercial and retail premises given to banks/ATM’s should be exempted from property tax as they are given for longer periods of time and lesser escalations in the license fees.Real estate sector is a big economy driver and any positive step towards the interest and welfare of the small consumer will have a macro impact on the economy.