Budget 2016’s impact on real estate — some hits but left crying for more

It has been an interesting sequence of initiatives announcements over the last two years. First came the Make in India, Swachh Bharat, Digital India, Housing for All 2022, Start up and Stand up India and as the FM unfolded his third budget, it was like weaving a string of pearls of all key initiatives in some way or the other tying up all the key initiatives announced into a pragmatic, no big bang budget in an attempt to take India to the next leap of growth.

Budget 2016 has continued with a strong push towards infrastructure and sustainable economic growth as in the last year with announcements of Rs 2.18 lac crore outlays on roads and railways, mention of 160 small airports which can be revived, allowing private players to operate fleet services and concessions for new manufacturing companies in form of corporate tax which will all help the “Make in India” and boost growth. History has shown us time and again over the last few decades that when public expenditure on infrastructure has picked up, demand pick up happens and helps grow GDP.

Real estate is also a sentiment driven industry and measures to grow GDP will definitely be drivers to real estate, albeit in the long run. The 3 biggest challenges of the industry are availability of cheap funds, long and tedious approval process and not much clarity on land titles. The announcements in Budget 2016 addresses a few of the industry challenges. Some of the key aspects of Budget 2016 are as follows:

REIT’s was a good step taken by the government in the last budget but listing of REIT’s have not happened in the last 1 year. One of the sticky issues around Dividend Distribution Tax has been addressed. Distribution made out of income of SPV to the REITs and INVITs having specified shareholding will not be subjected to Dividend Distribution Tax.

Our PM has laid down a vision of Housing for All by 2022.The NARDECO-KPMG study on Decoding Housing for All by 2022 talks about building an additional 100 million homes by 2022. The government did spell out its intention to build 60 Mn houses by 2020. 90% of the demand in housing is in the affordable segment and the budget provided clear incentives to boost affordable segment in this budget like

100% deduction for profits to an undertaking from a housing project for flats upto 30 sq. metres in four metro cities and 60 sq. metres in other cities, approved during June 2016 to March 2019, and is completed within three years of the approval. Minimum Alternate Tax will however apply to these undertakings

Service tax on construction has been exempted on affordable houses up to 60 sq. metres under any scheme of the Central or State Government including PPP Schemes

Excise duty exemption, presently available to Concrete Mix manufactured at site for use in construction work at such site has been extended to Ready Mix Concrete

For the ‘first – Home Loan  buyers’, an 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 has been proposed

Investments in digitising digital records will go a long way in bringing about clarity on land titles. A beginning has been made in this budget with an outlay of Rs 150 cr for digitizing land records from April 16

The real estate sector has been going through tough times for now four consecutive years and the expectations from the third budget of the new government were extremely high to inject that dose which will spur growth in the sector and use real estate as another additional vehicle to grow the economy. The budget however left the industry gasping for More.

[Source: http://blogs.timesofindia.indiatimes.com/voices/budget-2016s-impact-on-real-estate-some-hits-but-left-crying-for-more/]