Income tax relief for homebuyers and real estate developers: How it will benefit you2 min read . Updated: 12 Nov 2020, 06:19 PM IST
- For primary residential real estate sales of up to ₹2 crore, the differential between circle rate and agreement value increased to 20% from 10% earlier
To boost demand amid festive season, the finance minister Nirmala Sitharman on Thursday announced income tax relief for both the homebuyers and real estate developers. For primary residential real estate sales of up to ₹2 crore, the differential between circle rate and agreement value increased to 20% from 10% earlier. The offer will be applicable till 30 June, 2021.
"The increase in the differential between circle rates and agreement value - from 10% to 20% (under Section 43CA) – is indeed a good move. This limited-period offer (up to 30 June 2021) will benefit both developers and homebuyers," said Anuj Puri, chairman – ANAROCK Property Consultants.
"For homebuyers, it is a clear added financial benefit to round off the existing offers and discounts. Additionally, the consequential relief up to 20% to buyers of these units under Section 56(2)(x) of the IT Act for the said period will definitely boost demand, especially in the affordable and mid segments," he mentioned
For developers, this move will help clear unsold stock, he added. As per ANAROCK Research, there are approx 5.45 lakh unsold units across the top 7 cities priced up to ₹1.5 crore while another 49,290 units priced between ₹1.5 crore to ₹2.5 crore.
"The move is a win-win for both developers and homebuyers. It will help reduce the high inventory, reduce the cost of acquisition for homebuyers. Real estate prices in many pockets of India have remained subdued, declined in some cases, a higher difference will help address this issue," Krish Raveshia, CEO ,Azlo Realty.
"The tax relief will help the buyers expedite their decision of owning a home. The market has already started picking up pace, and tax relief on the differential between circle rate and the actual price will help the buyers get additional financial help as developers are already extending lucrative offers to them," said Deepak Kapoor, director, Gulshan.
Finance minister also announced a ₹18,000-crore additional outlay for the urban housing scheme to help complete real estate projects. " ₹18,000 crore would be provided over and above the Budget Estimates for 2020-21 for the Prime Minister Awas Yojana (Urban) through additional allocation and extra budgetary resources," Nirmala Sitharman announced. This will over and above ₹8,000 crore already provided this year. The move will help start work on 12 lakh houses as well as complete 18 lakh houses.
"This will help bridge the housing gap in the country to a good extent and is simultaneously an excellent economic growth driver by creating more employment," said Puri.
"Five years after the implementation of this ambitious scheme, Pradhan Mantri Awas Yojana (Urban) has made steady progress across states. As of August 2020, a total of 1.06 crore homes had already been sanctioned in the country, of which 33% or approx. 35.18 lakh homes are completed while another 66.23 lakh units have been grounded for construction," he explained.