Finance Ministry will exempt rental profits earned by Builders in past 10 years.

By Abhay Harish Shah, Realty Quarter

In the past few years, real estate developers have faced many challenges because of the frozen market. For the same, in a recent meeting with senior finance ministry officials, the real estate developers were asked to recommend some steps to address such challenges.

According to the sources, they were also asked to submit a note on the business model of rental housing, in which expenses could be deducted, but profits would be exempted from tax for a period of 10 years.

For property developers, the finance ministry can look into a 10-year tax holiday for rental housing profits in an attempt to revive investment and promote a slowing economy, sources said.

In recent years the country’s investment declines and have dropped from 36% of GDP to 29%, and the Minister of Finance believes that the main reason for the decrease is a slowdown in the real estate sector. The Department has already begun discussions with industry bodies on their budget demands for 2019-20 which are expected to be submitted to Parliament in July.

To raise the demand in the sector, the GST Council cut tax rates for new housing projects from 8% to 5%, without input tax loans, 12% with ITC, and to 1%- 5% respectively, for other affordable housing.

However, builders have the option for ongoing residential under-construction projects to choose between old and new tax rates to help solve problems with an input tax credit.

The real estate developers demanded that since the sector is in financial stress due to lack of funding from banks and NBFCs, the government should take some steps to improve the liquidity situation of developers and also restructure their loans.