Mr.A.Shankar is National Director and Head of Urban Solutions at JLL, India
The Finance Minister, during the 2016 Union Budget session, has delivered a balanced budget addressing some of the many expectations from the real estate sector. The Budget has tried to propel various initiatives like Smart Cities Mission and Housing for All which have a major impact on the real estate and infrastructure sectors.
Highlights of the Budget:
- For first-time home buyers, the government has proposed to give 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 value of the house does not exceed Rs 50 lakh. This announcement will mostly benefit first time home buyers in tier-III and tier-II cities.
- Major boost to housing activity under the Pradhan Mantri Awas Yojna, through which the government has been trying to address Housing for All by providing 100% tax deduction for profits to developers for building houses up to 30 sq m in the four metro cities and 60 sq m in other cities, for projects approved between June 2016 and March 2019 and is completed within three years of the approval. Minimum Alternate Tax (MAT) will, however, apply to these undertakings. Service Tax will be exempted for construction of houses less than 60 sq m.
- Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) could,soon, become a reality after the exemption of the Dividend Distribution Tax (DDT) – a clear indication that many REITs / InvITs listings are expected to be rolled out this financial year.
- The revamp of Model Shops & Establishment Act is a welcome move and could help the retail sector considerably. Unorganised retail could receive a fillip, as smaller shops will now be given the option to stay open for all seven days of the week, like organised malls.
- The Budget made a strong case for promoting start-ups in India with 100% tax rebate on profits announced for them for three years. In the recent past, we have seen successful start-ups (particularly in the technology and e-Commerce sectors) becoming big and occupying a commendable share in office space. As more start-ups get encouraged to commence operations, we expect developers to offer more small mixed-use properties or arrangements for sharing of office space to cater to this segment.
- The infrastructure sector was definitely a major beneficiary since approximately 16-18 km of road construction per day has been achieved by the middle of the current financial year and the Budget has adopted measures to significantly step up NHAI capabilities in this regard.
- The Budget has outlined revival plans for underserved airports in partnership with state governments, with a vision to spend around Rs 100-150 cr on each airport to make them fully functional. This will boost infrastructure in many tier-II and tier-III cities and is, without a doubt, a positive for their real estate markets.
- The government will revive its national land record digitisation scheme with a funding of Rs 150 cr. This initiative is expected to increase the overall transparency in real estate and will have a positive impact on the real estate foreign capital inflows.
However, more clarity is expected on GST implementation which was a major expectation from the industry and would definitely improve the current status of economic activities in the country.