The government's move to allow primary or first sale of housing units costing up to Rs 2 crore at a price 20 per cent below the stamp duty circle rate would enable real estate developers to liquidate their unsold inventory and also benefit homebuyers, the finance ministry said on Friday.
The Aatmanirbhar Bharat 3.0 package announced by Finance Minister Nirmala Sitharaman included income tax relief measures for real estate developers and homebuyers for primary purchase/sale of residential units of value of up to Rs 2 crore for the period from November 12, 2020 to June 30, 2021.
"In order to boost demand in the real-estate sector and to enable the real-estate developers to liquidate their unsold inventory at a rate substantially lower than the circle rate and giving benefit to the home buyers, it has been decided to further increase the safe harbour from 10 per cent to 20 per cent under section 43CA of the Act for the period from November 12, 2020-June 30, 2021, in respect of only primary sale of residential units of value up to Rs 2 crore.
"Consequential relief by increasing the safe harbour from 10 per cent to 20 per cent shall also be allowed to buyers of these residential units under section 56(2)(x) of the Act for the said period," the ministry said in a statement. So far, the law restricted the differential between circle rate and agreement value at 10 per cent.
The I-T relief announced on Thursday would mean that tax would not have to be paid if, for example, the circle rate of a property in Rs 100 and the purchase/sale value is up to Rs 80. Therefore, for these transactions, circle rate shall be deemed as sale/purchase consideration only if the variation between the agreement value and the circle rate is more than 20 per cent.
This relaxation, which is applicable till June 2021, would help builders clear their unsold stock, which is estimated at around 7 lakh units in major seven to eight cities.
Nangia Andersen LLP Partner Sandeep Jhunjhunwala said it is sure to provide a breather to the industry.