PM Narendra Modi has underlined that homes have to be priced reasonably enough to cater to the needs of the general public. The realty sector has been under the scanner, which came into the limelight with the roll out of Real Estate Regulation Act (RERA) a few months back.
The Prime Minister is getting stern with the real estate industry, which has attracted a lot of black money. The realty market can never be described quite as a friend of the buyer, typically for the mid-income group buyer. Investors in the residential real estate have been completely vulnerable to developers who generally hold up releases and fleece customers by charging more on the pretext of interest or others.
The government is in the planning process of bringing another law that will take to task opportunists on the scent of profit-making who have brought in inflation and made it stay on in this very vital industry. Impractically inflated home costs could be brought to a rational level if a proposal from the revenue department is passed and enforced. This proposal will make it mandatory for builders to pay taxes on their stock of ready houses that have not yet been sold.
Based on the court order, according to which the flats that are ready for sale but have not yet been sold and are held back by developers, stock-in-trade will face a tax liability in the form of ‘income from house property’ even though they have not been given on rent. According to a proposal by the IT department to the finance ministry, it was pointed as a new way of acquiring more tax.
Real estate firms display the ‘ready to move in’ as stock-in-trade and the income generated therein is let off as business earnings, as is the case in other such businesses.
In a market that is at its peak, quite a few developers keep back apartments to draw from the price appreciation that will accumulate in some years once the project is complete.
According to the new law, builders will have two options; to put these properties on sale soon, maybe supported by discounts, or run into costly legal trial.
As per Liases Foras, the unsold inventory comprising properties that are in the process of being build and completed has gone up higher from 734 million sq ft or about 734,000 apartments in March 2017 end to 765 million sq ft or about 760,000 apartments in June end same year.
As the majority of builders have not brought down the prices against the expectations of the buyers and instead are keeping the inventory in a jam, many mid-income group home buyers face the uncertainty of losing the opportunity, or paying much higher than the market price. The Modi government is expected to take an initiative towards the real estate sector in order to bring fair deals to home buyers.
There is also one more policy that is presently under consideration by the government; linking of property to Aadhaar. This, in addition to making the sector transparent, will also reduce the skyrocketing prices of homes. Union Housing Minister Hardeep Puri recently indicated that Aadhaar linkage with property transactions would be made mandatory.
Puri said that this initiative will work to extract black money from realty sector and also put a clamp on Benami properties. Hoarders of black money who use property as a frontend to hike prices for customers will be brought to the book with Aadhaar linkage.