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Ask an Expert - Real Estate

Abhishek Goenka

Partner (Tax), PwC India

Topic: Real Estate

The real estate sector is a major contributor to economic growth in India. It accounts for high inflow of foreign investments and has a considerable job potential. Even so, this sector has been under a serious stress over the past few years. Considering the situation, significant measures are needed to give a boost to the sector, which is eagerly awaiting an industry status to enable a reduction in interest costs and collaterals. On the buyer?s side, a reduction in multiple taxes incurred while buying a house and an increase in deduction on housing loans (principal and interest) to enhance disposable income of individuals are expected. Other expectations from this year?s Budget is the introduction of a single-window clearance mechanism for real estate projects and implementation of the real estate regulatory Bill.

Do you think the govt will increase the tax deduction on housing loans in Budget 2016?


Under the current provisions, a tax deduction is available on principal repayment of loan under Section 80C. This is capped at the overall limit of ~1.5 lakh. Additionally, deduction on interest paid is available, capped at ~2 lakh in case of self-occupied property. We believe there is scope to increase the limits in the Budget. Further, the income-tax laws provide a mechanism for claiming interest paid during the construction period.

What are the challenges for a govt infra project aimed at building basic low-cost houses that can serve as shelters to footpath dwellers?


A temporary arrangement may not be a good solution. For low-cost houses to be successful and sustainable, both development and throughput need to be speedy. There is a dearth of affordable and adequately sized land parcels in inner urban localities. This takes us to outer localities, but the challenge then is to provide a mass rapid transport system to enable people to commute to the urban areas. Also, high amount of taxes paid to get ownership hurts the cause of low-cost housing. The local development rules seem more attuned to premium housing.