New Delhi: In a boost for the residential real estate sector, finance minister Nirmala Sitharaman announced income-tax relaxation on the first-time sale of residential units worth up to Rs 2 crore.
The government has increased the permitted differential between the circle rate and the agreement value of such housing units to 20% from the current mandated limit of 10% till 30 June 2021.
"This measure will reduce hardships faced by both home-buyers and developers and help in clearing the unsold inventory,” Sitharaman said while announcing the third set of stimulus measures called Atmanirbhar Bharat Abhiyaan 3.0.
Circle rate is essentially the price per unit area as notified by the state government authorities below which property transactions cannot be registered.
Section 43CA of Income-Tax Act restricts the differential between circle rate and the agreement value at 10%.
However, since property prices have fallen after the coronavirus-induced economic slowdown, market prices have turned lower, thereby restricting the sale of housing units.
The higher differential allowed will also help in reducing the tax liability of homebuyers as the tax will be applicable to the lower value of residential units.
“The income tax relief provides an incentive to the middle class to buy homes,” said Sitharaman, adding: “The decision has been taken to boost sales at a time when demand is low and inventories have piled up.”
Commenting on the decision, Anuj Puri, chairman – ANAROCK Property Consultants, said the increase in the differential between circle rates and agreement value is indeed a good move.
“For home buyers, it is a clear added financial benefit to round off the existing offers and discounts. Additionally, the consequential relief of up to 20% to buyers of these units… will definitely boost demand, especially in the affordable and mid segments,” said Puri.
“For developers, this move will help clear the unsold stock,” he added. As per Anarock Research, there are approximately 5.45 lakh unsold units across the top 7 cities priced up to Rs 1.5 crore, while another 49,290 units priced between Rs 1.5-2.5 crore.
Also Read: FM announces Rs 18,000 cr additional outlay for urban housing scheme
