Rationalized provisions of deduction under subs section (10) of Section 80-IB which provide for 100% deduction of the profits derived by an undertaking from developing and building housing project. No contractor other than developer is eligible for tax benefits under this section now and it will take retrospective from April 1, 2001 and shall apply in relation to assessment year 2001-02.

In a project that claims for benefits under 80 IB (10), not more than one residential unit should be allotted to a same person so as to meet the objective of extending the tax exemption to encourage building of housing stock for low and middle income households. This amendment takes effect from April 1, 2010.

Extended sunset clause for STPI units (U/s 10A & 10 B of IT Act) by one year to 2011-12.

Extended special deduction u/s 36(1)(viii) available for financial corporation & banking companies not exceeding 20% of profits subject to creation of a reserve.

Removal of surcharge personal taxation.

Increase in tax exemption by Rs 15000 for senior citizens and by Rs 10000 for women and other assesses.

Restructuring of developers debt allowed upto June 2009 has to be extended beyond that period wherever required as the recovery of realty sector is likely to take more time.

Section 80 C benefit ceiling should be raised to Rs 3 lakh from current Rs 1 lakh and of which Rs 2 lakh should be allowed exclusively for principal repayment. Currently Sec 80 C allows Rs 1 lakh deduction on various payments / deposits including principal amount of housing loan.

Under Section 24 of IT Act, the deduction on account of interest payment on housing loans is currently 100% for rented dwelling units and Rs 1.5 lakh for owner occupied houses. U/s 24 of IT Act the 100% deduction on interest payment should be made available for both rented as well as owner occupied houses. In case 100% deduction is not agreeable, then the limit of deduction should be raised from Rs 1.5 lakh to Rs 3 lakh.

Section 80IB of IT Act that provides 100% tax exemption on income from housing project was available on projects approved before 31^st March 2007 and this date was not extended in Finance Bill 2007, the concession on projects sanctioned after 31^st March 2007 has ceased.

Group housing and integrated township development should be brought with in the definition of infrastructure and made eligible for tax exemptions u/s 80IA.

Housing Sector should be granted status of industry for all concessions, rebates and easy finances for giving proper boost to a very important sector of economy.

To generate interest of developers in LIG/EWS housing, where supply is negligible and demand huge, it is suggested that concessions under Section 80IB(10) of IT Act available before 31^st March 2007 be restored and all conditions except area of residential units be removed to make it more realistic.

Capital gain from transfer of residential property if invested in acquiring one residential house is exempt from income tax U/s 54 of IT Act and this restriction of one house should be removed and capital gain should be exempted from income tax if it is invested in acquiring one or more residential property.

Deduction upto 40% of profit derived from business of providing long term housing finance, as applicable before 2007-2008 should be restored. Currently U/s 36(1) (viii) of IT Act its 20% of profit derived from business of providing long term housing finance is deducted from income, provided it is carried to special reserve. This will improve thin margin of Housing Finance Companies (HFCs) and increase their lendable resources.

A deduction for bad and doubtful debts equivalent to 10% of the doubtful and loss assets is available to banks currently U/s 36(1)(viia) of IT Act. This should be extended to Housing Finance Companies as that available for banks and all the bad debts should be considered for deduction on provisions made and interest de-recognised as per the Regulators' directions. This will go a long way for the sustained growth of the Housing sector.

Income from investment by HFCs in housing projects, which were treated as infrastructure is exempted U/s 10(23G) of IT Act earlier and was omitted by Finance Act 2006 w.e.f. April 1, 2007. This has to be reintroduced.

Rental income derived by renting out residential property from 1.4.2009 would be exempt from Income tax for five consecutive years if the built up area of the unit does not exceed nine hundred square feet. This provision would be applicable only for such residential accommodation, which is ready for occupation on or after 1.4.2009.

Like Infrastructure Fund, a Dedicated Affordable Housing Fund should be created exclusively for EWS/LIG housing and lend to developers at cheap rate of interest.

There should be parity between banks and HFCs as far as risk weight (RW) and Capital adequacy requirement (CAR) are concerned. CAR for Housing finance companies is 12% as compared to 9% for banks even though the risk weight on housing loans is same for Banks & HFCs at 50% for loans upto Rs 30 lakh with LTV upto 75% and for loans above Rs 30 lakh it is 75%.

Residential housing projects should be taken out of service tax net. Service Tax on complex services was introduced through finance bill 2005. It is an additional burden on homebuyers and deterrent for housing development.

Restriction imposed on ECBs in housing and real estate sector should be lifted. It will help reduce cost of fund and property prices.

Stamp duty charged by States is very high and that should be brought down to 2-3%. It should also be made uniform in all States / UTs.

Launch of REIT should be expedited. It will boost supply of fund to the sector.

Higher rate of depreciation (say 30%) should be introduced on residential accommodation if built by the employer for its employees.

Incentives for slum re-development

Stock to watch

Unitech, DLF, Sobha Developers

Outlook

Union Budget though has not provided any measures for resurrect of demand for housing stocks as well as commercial space. This has disappointed the industry.

As far as the rationalization of benefits u/s 80IB (10), the benefit is available only for projects approved by local authority before March 31, 2007 and certain other conditions relating to build up area and land area. Though the provision of not selling more housing units to one person/ his family members/ HUF etc is a dampeners/ negative for the industry, which is already unable to liquidate its housing stocks the level of impact is tough to gauge.

Likewise the removal of surcharge, increase in tax exemption by Rs 15000 for senior citizens and by Rs 10000 for women and other assesses will improve disposable income. But these will be largely inadequate considering the current property prices in Urban centers and interest rates, and will hardly be any incentive for pushing up demand for real estate sector.

Overall the budget is neutral with marginally negative bias.