New Delhi: Income from real estate investment trusts must be taxed on the lines of mutual funds to promote residential housing in the country, the Federation of Indian Chambers of Commerce and Industry (FICCI) has suggested.
The chamber has also called upon Finance Minister P Chidambaram to do away with the service tax on rental income from commercial property in the ensuing budget and proposed a duty drawback scheme for developers to promote cheaper housing.
The recommendation is part of a 15-point agenda suggested by the industry lobby based on the draft regulations on real estate investment trusts released by the government recently.
The FICCI note points out that among the various classes of real estate, the one which was needed most in India today was housing. Middle-income group housing is developed and sold by the developer to individual homeowners.
However, this asset class is not held by real estate developers for giving out on rent, partly due to the prevailing tenancy laws and the law stipulates that that investment should only be in income-generating real estate.
"This would mean funds from real estate investment trusts cannot be employed for residential housing. In other words, these trusts can only promote commercial buildings and give no assistance whatsoever to promote housing," it said.
The chamber has accordingly recommended that the relevant rules be amended so as to allow such trusts to invest in housing development activities as well, and not be restricted to income-generating real estate alone.
While recommending a duty drawback scheme, FICCI says the excise duties paid on raw materials such as cement and steel could be paid back. It has also pushed for a timeframe in awarding environmental clearances to real estate projects.
The other recommendations are:
-The stamp duty payable by the real estate trusts be brought under value-added tax system
-All assets covered under real estate trusts must pay duty on the incremental sale value
-Dividends be considered by way of bonus issues
-Define the concept of non-income generating assets since there is limit of 20 percent on them
-To prevent money from real estate trusts being invested in speculative land holdings, insert a stipulation that acquisition of vacant land must be followed by commencement of construction within six months
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