REALTY : Highlights of Indian Real Estate Budget 2016-17

Indian Real Estate Budget 2016-17 is being hailed as one which is going to give a boost to both demand and supply. The focus on affordable housing is the key player in the “Housing for all by 2022” scheme of things.

The Indian real estate sector which has been witnessing a slowdown for the last couple of years breathed a collective sigh of relief when the Union budget was presented. It seems the Prime Minister’s vision of “housing for all” by 2022 is on its way to being fulfilled. So what did the budget offer the real estate sector?

REITs not subject to Dividend Distribution Tax. Removing Real Estate Investment Trusts (REIT) from the purview of Dividend Distribution Tax is being hailed as a major step towards making affordable housing a reality. Pass through status for rental income and rationalizing capital gains for sponsors exiting at the time of listing of the units of REITs had already been done in the last 2 budgets. While most people in the industry are welcoming this as the removal of the last irritant for REITs, there are others who feel there’s still scope for an extra push. Bearing stamp duties on properties also need to be looked into although it does not fall in the purview of the state government. Still, asset owners, who had put certain properties on hold, can now look into REITs as a viable option.

Additional interest deduction for first time home buyers. As an incentive to first time home buyers, the finance minister announced a deduction for additional interest of Rs. 50,000 per annum for loans up to Rs. 35 lakh, sanctioned during the next financial year, provided the cost of the house does not exceed Rs. 50 lakh. Industry sources see this as a good push for first time investors.

Affordable housing defined in terms of size rather than value. When the finance minister declared an exemption from service tax on construction of affordable houses up to 60 sq m under any scheme of the Central or State government including PPP schemes, this was the first time when someone was looking at the house size rather than market value.

Affordable housing in metros and II tier cities. By announcing a 100%deduction for profits to housing projects with home sizes of up to 30 sq m in metros and 60 sq m in other cities, the Finance Minister has addressed the need for affordable housing in urban areas. The scheme, of course, only applies to projects approved between June 2016 and March 2019, and completed within 3 years.MAT will still need to be paid, but despite that there should be an upswing of 15-20% in profits for the builders. While generally welcomed, some builders do feel that the 3 year period is a little tight, as approvals and construction can take a longer time. Doubts are also there about the housing space limit being equitable.

Excise duty exemption for concrete mix. Till now, it was just the concrete mix manufactured at site which had been exempt from excise duty. The budget has tried to do away with this irritant by extending the same privilege to Ready Mix Concrete. This is hailed as a genuine rationalization of taxes.

Relief for rent payers. The previous limit of deduction of rent paid under Section 80GGof Rs. 24,000 per annum has been increased to 60,000, thereby giving people living in rented houses a great relief.

Overall, the Real Estate Budget India 2016-17 is being hailed as one which is going to give a boost to both demand and supply. The focus on affordable housing is the key player in the “Housing for all by 2022” scheme of things. For an industry which has been in the slumps for the last couple of years, this vision suddenly seems achievable, and more than worth the effort.

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