From demonetisation to the Real Estate (Regulation and Development) Act (RERA) to the Good and Services Tax (GST) – a lot has changed over the last two years. These, coupled with the budgetary reforms of 2017, gave a huge impetus to the real estate sector, which was reeling under the acute pressure of plummeting sales.
As this year’s budget is just around the corner, let’s take a look back and see some reforms from Union Budget 2017-18 that proved to be Bollywood blockbusters for the sector.
Infrastructure status to affordable housing
The Union Budget 2017-18 provided ‘infrastructure status’ to affordable housing.
“Granting infrastructure status to affordable housing had a huge impact on the sector as the cost of funding for builders reduced, the benefit of which was ultimately passed on to homebuyers,” said Niranjan Hiranandani, President NAREDCO.
The infrastructure status was, undoubtedly, the need of the hour to ensure easy access to funds for developers at lower rates. The success of the announcement can be gauged by the simple fact that the majority of the new launches in 2017 has been in the affordable segment. In fact, several leading players in the industry ventured into this low-profit segment, propelling the growth of affordable housing.
Change in carpet area
“The decision to increase the qualifying unit area for affordable housing from built-up area to carpet area led to an increase of around 20% per unit for the end user,” said Manoj Paliwal, Chief Financial Officer, Omkar Realtors & Developers Pvt Ltd.
The announcement brought cheer to buyers as it meant more spacious homes. Additionally, with private players entering this segment, buyers were also sure of better quality homes unlike the ones provided by development authorities.
Tax relief on unsold stock
In a major relief to developers, the Finance Minister also changed the period for calculation of notional rentals on unsold stock held by developers for tax purpose. It was announced that for a property held as stock in trade, which is not let out during the whole or part of the year, the deemed annual value would be NIL for the period up to one year after completion.
“Tax relief on unsold stock and tax breaks in the budget helped developers to cut their cost, improve their bottom-lines and get additional liquidity to improve efficiency for the year,” added Manoj.
Capital gain tax
The capital gain tax period was reduced to two years from the previous three, which translated into less capital gain tax for investors who exited the market.
Further, “The decision to tax capital gains on Joint Development Agreement (JDA) only upon completion of the project was also a significant move,” added Surendra Hiranandani, CMD, House of Hiranandani.
Increase in time frame for completion
“Increasing the time frame for completion to five years indicated that the government acknowledges the practical and operational difficulties faced by developers in this category,” added Surendra.
