How to Increasing demand for commercial property in India...?

The real estate sector has been a major contributor to the growth of the entire economy and is expected to contribute in approximately 13% of the country's GDP over the next 5 years. If we talk about improving the business environment, then the commercial real estate sector can be considered a major beneficiary. The sector has been promoted with government initiatives such as RERA and GST, which allowed large institutional investors to make large investments in commercial property in India, thereby improving the overall business conditions of the country.

The continued expansion of the service sector has led to the increasing demand for office spaces and thus can be considered as one of the major growth factors of the commercial real estate segment. It is estimated that the average demand for office space across India will increase to 46 million square feet by 2021.

Policy reforms such as REITs (Real Estate Investment Trusts) will further promote the development of the commercial real estate sector by reducing the burden of capital costs of projects financed on real estate developers.

Increasing FDI in the e-commerce markets has fueled the growth of the warehousing and logistics sector and further increased the demand for commercial space benefiting the commercial property sector in India.

The retail space is also expected to witness strong growth in the coming years and is expected to grow at a rate of 25% to 30% in the next financial year. Finance Minister Sitharaman's Budget 2020 has also brought some good news for the commercial real estate sector. Establishment of new smart cities, development of around 100 new airports across the country, formulation of national logistics policy, announcement of National Infrastructure Pipeline will likely increase the demand for commercial real estate sector especially office segment.

Builders can get 10 years tax exemption on rental profit tax on rental housing

According to the Income Tax Act in India, income from property is considered taxable. This tax is levied on income derived from a commercial, residential or industrial property. If income is received from a property, the owner of the property is required to pay tax on the actual income as well as the rental tax received from the property. Deemed rentals are analyzed by estimating the potential income that a property can achieve keeping in mind the parameters and dynamics of the market.

Rental Houses Tax on Property Income

Income from self-occupied property is deemed to be income from rented property and vacant property i.e other than self-occupied house, is taxable under the section "Income from property". The taxpayer is required to pay tax on the "annual taxable value" of the property, which is calculated after adjusting the deduction under section 24 from the Net Annual Value (NAV) of the property.

Tax waiver of 10-years

In lieu of the decline and slowdown in investment in the real estate sector, the Finance Ministry is open to considering a 10-year tax waiver for real estate developers on the gains from rental housing. This can be detrimental to supporting revived investments and subsequently promoting a slowing economy.

Pleading by Real Estate Industry

To address this issue, real estate developers have been directed by the ministry to make suggestions to address the challenges faced by the industry. In addition, developers have been asked to present a rental business model where deductions are reimbursed and exempted from taxes for a period of 10 years. The real estate industry has long been demanding that the government take steps to rectify liquidity shortages due to lack of funds from banks and NBFCs.

Current GST Waivers

Earlier in 2019, the GST Council dropped GST on sluggish housing to 1% on affordable housing and GST on 8% (without input tax credit) on under-construction houses to boost sluggish demand. In real estate. In addition, for ongoing residential projects, builders have the option to choose between the old GST and the new GST to facilitate input tax credit issues.

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