Finance Minister Smt. Nirmala Sitharaman has announced an increase in the permitted differential between the circle rate and the agreement value of housing units as an initiative to boost housing sales in real estate.
The current limit of 10 percent in the differential between circle rate and agreement value has now been increased to 20 percent (under Section 43CA). This move will benefit both developers and homebuyers. The offer will be applicable till June 30, 2021.
Commenting on this announcement of the Finance Minister, Mr Krish Raveshia as the CEO at Azlo Realty said, "The move is a win-win for both developers and homebuyers. It will help reduce the high inventory, reduce the cost of acquisition for homebuyers. Real estate prices in many pockets of India have remained subdued, declined in some cases, a higher difference will help address this issue".
Also Read: Union Budget
How will it benefit developers and homebuyers?
As previously mentioned about Section 43CA of IT Act, this Section restricts the differential between circle rate and agreement value at the rate of 10 percent. Moreover, the restriction tends to curb the sale of housing units. The latest revision in the differential will be applicable in residential units that are priced at a value of up to ₹ 2 Cr.
Smt. Sitharaman expressed her concern towards real estate by stating that the decision has been taken to boost sales at a time when demand for housing properties is low and inventories have piled up across various regions in the country.
Considering the real estate scenario of the top 7 cities, there are reportedly around 5.45 lakh unsold units priced up to ₹ 1.5 Cr and on the other hand, 49,290 unsold units priced between ₹ 1.5 Cr to ₹ 2.5 Cr. With the latest announcement, developers can expect to clear their unsold stock of properties.
The move will also help in reducing the tax liability as the tax will be applicable on the lower value of residential units.
Stating benefits to the homebuyers, Director of Gulshan Mr Deepak Kapoor said, "The tax relief will help the buyers expedite their decision of owning a home. The market has already started picking up pace, and tax relief on the differential between circle rate and the actual price will help the buyers get additional financial help as developers are already extending lucrative offers to them".
Also Read: Economic Growth After Union Budget
More from the government for real estate
Such a decision has come at the right time when the demand for properties has slowed down resulting in a huge pile of inventories. Earlier this month, Finance Minister also announced INR 18,000 Crores as an additional outlay to the urban housing scheme.
Another recent initiative taken by the government was in a webinar addressing various Indian states to reduce stamp duty on registration of properties to help speed up the sale of housing units.