Financial Daily from THE HINDU group of publications
Friday, Jul 02, 2004
Industry & Economy
Real Estate & Construction
Construction cos seek thrust on rural housing
New Delhi , July 1
THE construction sector has demanded a greater emphasis on rural and low-cost housing through better access to credit and streamlined procedures in the Budget.
The industry has also suggested certain revenue-neutral measures to spur demand for housing in the country.
In its pre-budget memorandum to the Government, the Confederation of Real Estate Developers' Association of India (CREDAI) has suggested easy availability of credit and interest rate subsidy for lower income group (LIG) and economically weaker sections (EWS).
"The Government should make sure that low interest and low margin money loans are available for people from EWS (income less than Rs 2,500 per month) and LIG (Rs 6,000-7,000 monthly income) categories. Loans to these categories of borrowers should be made available at a subsidised rate and banks should be encouraged to relax their norms for declaring such loans as non-performing assets," CREDAI Resident Director, Mr G.P. Savlani, told Business Line.
The Association has also suggested that builders of low-income houses should be allowed the benefit of income tax deductions under section 80IB(10) without the restriction of the minimum plot size of one acre.
"It is not always possible for a builder to construct low-cost houses on a plot size of at least an acre. We feel that the benefits should also be available to smaller projects for low-income groups, Mr Savlani said.
The Construction Federation of India (CFI) has suggested that companies should be allowed to factor in their profit or loss from a joint venture project as a single entity instead of the present system of treating them as Association of Persons (AOPs).
"Contracts are often executed through joint ventures so that different companies can pool in their expertise and resources. In case of profit sharing joint ventures, these are taxed as AOPs. It is unfair to tax a member's share of profit in a joint venture when there is an overall loss to his company during the year. Similarly, an individual's loss in a joint venture should be off-set by his company's profit," a statement from the Federation said.
The CFI has suggested that construction companies should be exempted from tax deduction at source (TDS) of 2 per cent as the industry operates on wafer thin margins of 4-5 per cent.
The benefit should be allowed on the condition that the surplus funds are invested in another project that is eligible for a similar tax exemption.
The Federation has also suggested duty free imports of capital goods for infrastructure projects and 5 per cent duty on steel and cement imports. For domestic steel and cement, the excise duty should be in the lowest band of 8 per cent to encourage the construction sector, the single largest employer in the country.
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