The Union Budget 2016 is more critical for the development of India in general and Indian cities in particular especially after the launch of major urbanization schemes such as Smart City Mission, AMRUT, etc. Success of this is fully dependant on the Union Budget and the real estate sector will have a major impact provided some of the expectations from the industry are met. This will help the real estate sector to come off the slowdown with increased sales velocity and higher investor sentiment.
REITs
The Modi government had introduced Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) to ensure liquidity for realty and infrastructure developers last year but none came forward to list their REITs because of various grey areas in the policy and not much clarity in the Dividend Distribution Tax (DDT) for investors of REITs. The industry wants the government to do away with DDT in the forthcoming Budget 2016. This will revive the real estate and infrastructure sector as well as provide a significant boost to Indian economy in general.
Goods & Service Tax Bill
Another important reform expected out of this budget is the implementation of GST. This will impact the logistics and industrial real estate sector as it is expected to offer clarity on the taxation structure. E-Commerce is emerging in India in a big way, however, there is no unified law to govern this sector. This is a recent trend and contributes a lot to country’s economy – a clear definition along with FDI regulations needs to be drafted. This move will increase investors in this particular sector and ultimately boost the growth of technology.
Tax relief & home insurance
Since infrastructure sector will be in top focus, the government needs to encourage alternate and innovative streams of funding infrastructure projects along with increased fund allocation for highways and other related infrastructure. Tax deduction limit for housing loans should be increased from INR 2 lakhs since the cost of housing has gone up a lot in metropolitan cities. After the recent disaster in Chennai due to floods as well as the knowledge that other metropolitan cities are also vulnerable to natural disasters, home insurance should be introduced at a rate similar to various government’s life and health insurance schemes.
Single window clearance
Real estate industry’s demand for single window clearance along with infrastructure status will bring in lot of improvements to the sector and developers will save on cost, thereby, making it feasible to provide affordable real estate products. This will also support making the government’s Housing for All mission a success.
Global investors continue to look at India as a potential destination. Country specific and sector specific FDI norms need to be revisited since FDI origin countries are changing and a new wave of FDI inflows are expected. This budget is definitely an important milestone to tap and encourage such investments. Look forward for an exceptional budget which will help the industry grow manifold.
A Shankar is National Director and Head of Urban Solutions at JLL, India.