Developers can expect a 10-year tax holiday on profits earned from rental housing. 

 According to the sources, the Finance Minister may look into the matter to revive the investment and boost the slowing economy.

Real estate contributes significantly to the GDP of the country, but continues to be largely unorganized. High transaction costs, high interest rates coupled with credit crunch, non-standardized bye laws and restrictive legislations are the main impediments to the growth of the sector.

The Finance Ministry believes that the slowdown in the real estate sector is the major reason behind this slump.

Over the past few years, investments in the country have fallen from 36 per cent of GDP to 29 per cent, and the finance ministry believes that the primary reason for this decline is slowdown in the real estate sector.

A meeting was held with senior Finance Ministry officials and they expect the real estate developers to come forward with suggestions and steps to address the challenges prevailing in the sector. Also, the developers are supposed to submit a note on the rental housing business model.

The officials revealed that the expenses would be allowed to claim for reduction and the profit earned will be eligible to be exempted from tax for a time period of10 years.

 The ministry has already started discussions with industry bodies on their demands from Budget 2019-20, which is likely to be tabled in Parliament in July.

The real estate developers had long been demanding that the government take steps to improve liquidity situation of developers and also restructure their loans saying that the sector is in financial stress due to lack of funding from banks and NBFCs.

In a bid to boost the demand in the real estate sector, the GST Council had cut tax rates on new projects under affordable housing to 1 per cent and 5 per cent for others, without input tax credit, from 8 per cent and 12 per cent with ITC, respectively.

Builders of ongoing under-construction projects had been given an option to choose between old tax rates and the new ones to help resolve input tax credit issues.