The Confederation of Real Estate Developers' Associations of India (CREDAI), which has around 20,000 members from across the country, also recommended tax incentives to boost investment in Real Estate Investment Trusts (REITs).
"Real estate sector has been under stress for more than 2 years. Economic uncertainty enforced by COVID-19 pandemic has only made it worse for the sector. After battling for survival, the sector is slowly moving towards revival," CREDAI said.
The association said that ensuring liquidity, access to funds and longer repayment cycles will help developers. It sought cheaper home loans and tax benefits on investments in housing to boost demand
"Reforms in taxation related to affordable housing, joint development and steps to promote foreign investment are the need of the hour," CREDAI said.
As per the present provision, the ceiling of deduction for principal repayment of housing loan is Rs 1,50,000 and the deduction is clubbed with other tax saving instruments.
"We suggest that the deduction under section 80C for principal repayment of housing loan should be increased from existing limit of Rs1,50,000. The deduction for principal repayment of housing loan can be considered for a separate or standalone exemption," CREDAI said.
An increase in deduction for principal repayment of housing loan will encourage the home buyers to invest in homes, it said.
CREDAI suggested that investment of up to Rs 50,000 in REITs should be allowed as deduction under Section 80C.
"REITs are one way of solving the liquidity problem in real estate. At the same time, it offers the investors a choice to diversify their portfolio. At present, there is no provision. We suggest an extension of exemption under section 80C to investments in REITs starting with Rs 50,000," it said.
Currently, units of REITs need to be held for 36 months to make them a long-term capital asset eligible for lower tax rate.
"We suggest the period of holding for units of REITs to qualify as long-term capital asset should be reduced to 12 months (as applicable for listed shares)...in place of 3 years. This will lead to faster adoption of REITs and bring the units held in REITs at par," CREDAI said.
REIT is a tax-efficient vehicle that enables owners of real estate to pool income-generating assets together in a portfolio and allows investors to buy ownership in real estate assets in the form of equity.
In India, two REITs have been listed so far.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.