The real estate sector contributed only 5% of India’s overall GDP this year in contrast to 10.6% contribution in the last financial year. Amongst major issues in the sector such as cheap credit and increased debt servicing levels and declining rate of FDI, the budget 2012 has emerges as a ray of hope for the real estate agents.
It seems that the finance minister has tried to create a balance between this year’s budget proposals. To tackle the liquidity issue the fiancé minister has proposed to made available the External Commercial Borrowing (ECB) for specifies low cost affordable housing projects. Also the interest to be paid on the ECB loan availed between the period of July 2012 to June 2015 by the real estate developer is proposed to be lowered by decreasing the tax rate at source from whopping 20% to meager 5%.
The deduction in the investment for the low cost housing projects increased from 100% to 150%. This change may provide a boost to the much needed affordable housing sector by a way of getting higher rate of deduction on capital expenditure though the cost of land is excluded from its ambit.
One of such proposals which is expected to make a great impact on the sector is the requirement of deduction of tax at source @ 1% on payment of consideration for the purchase of an immovable property having value in excess of 25 lakhs and Rs. 50 lakhs for such property in specified urban areas.
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