Quotes By Various Industry Heads on Finance Minister announcement

November 16, 2020 team Business Comments Off on Quotes By Various Industry Heads on Finance Minister announcement

Well thought Diwali gift for developers and buyers

The Finance Minister has announced no additional tax liability in the hands of both buyers and sellers where the differential in the actual transaction value of the property and circle rate is up to 20%. This will be effective immediately up to June 30th 2021 and applicable for residential sales in the primary segment for ticket size up to INR 2 crore. This comes as a significant benefit for both buyers and sellers as it will reduce and rationalise tax outgo to a great extent. Developers will now have the incentive in the form of this revised tax provision to pass on the benefit of lower market prices to buyers without incurring additional tax liability under the erstwhile provisions.

This announcement is timely given the following developments in the real estate sector:

Property values in a majority of India’s prime residential markets have largely remained stagnant in the past few years. Select developers in certain markets are providing price discounts to genuine homebuyers thereby leading to further rationalisation of prices. This is despite the fact that most of the developers are already operating on thin margins and have limited scope for a price reduction.
As of September end 2020, developers had a locked-in capital of nearly INR 3.7 trillion with unsold inventory to the tune of more than 450,000 units at various stages of construction across the top 7 cities.
This announcement will help in accelerating the pace of sales for developers, especially in the affordable and mid-priced segments.

Ramesh Nair, CEO and Country Head, JLL India

“The FM’s announcement of an increase in the difference between the so-called circle rates and the agreement value will lead to a further rationalisation of prices in the sector, especially in the premium or mid-income housing segment. While the same is applicable only for units priced lesser than 2 crores it will help developers in the primary market get an upper hand vis-a-vis the secondary market. The move can be attributed to the concerns raised by developers about their inability to reduce or offer lucrative prices because of the tax liability that would accrue as a result of price reductions. But on the other hand, the major part of the unsold inventory in metro cities is upwards of Rs.2 crores in the Rs.4.75 to Rs.12 crore range. A blanket announcement without the capping would have lead to cheers for developers across the sector and the customers, this Diwali.”  Mr. Ram Naik, Executive Director, The Guardians Real Estate Advisory

“The reforms announced by the Finance Minister will bring cheer to many businesses this Diwali. Extension of the emergency credit line guarantee scheme to various sectors impacted by Covid up to March 2021 will help SME businesses tide over this turbulent patch. An increased infusion of 6k crore in the NIIF debt platform for funding the infrastructure sector is a welcome move and will boost project financing.”

Aashit Shah (Partner) at J Sagar Associates

“The Central Government has taken a step in the right direction. Looking at the current market condition, many developers with ready inventory will be able to sell as the prices have actually been corrected in large parts of urban areas in India. I hope we see an improvement in sales in the next year. This the income tax incentive will stimulate demand for buying homes. This is a welcome move and we are optimistic that the Government will introduce more proactive steps for giving additional relief  to boost the real estate industry.” Mr. Bhushan Nemlekar Director, Sumit Woods Limited 

“Differential above 10 per cent between circle rates and agreement value translates into tax penalties under Section 43CA of the Income Tax Act. This has been a major stumbling block for price rationalization,” said Dr. Niranjan Hiranandani, President, NAREDCO and Assocham. “This pinches, especially when it comes to liquidating unsold inventory. Industry bodies like NAREDCO have been pointing out the urgency with which this needs to be sorted out, and the Hon’ble Finance Minister, in a limited-period offer (up to 30 June 2021), has enhanced this differential from 10 to 20 per cent. This is welcome. The FM also mentioned a cap on the flat value to be eligible for this – Rs. 2 crore. This will result in most projects in Metro Cities not being able to take advantage of this, it has consistently been pointed out by industry bodies that price points in Metro Cities need to be kept in mind while offering any such relaxation,” he pointed out. He went on to add that the ideal situation would have been one where this relaxation would be applicable to commercial real estate transactions as well. “Real estate as an industry and end-users, both would benefit if these two suggestions can be incorporated,” he concluded.

“Funding issues have been a major challenge for real estate,” said Dr. Niranjan Hiranandani, President, NAREDCO and Assocham. “Finance Minister Nirmala Sitharaman’s announcement, about additional funding of Rs. 18,000 crore for PM Awaas Yojana-Urban will add to the sparkle this festive season. This is over and above the Rs 8,000 already allotted this year, and will translate into more homes for home seekers, more employment opportunities as also good business for suppliers and industries peripheral to real estate and construction,” he concluded.

Related Articles