#UnionBudget2016: Real Estate Sector Gives a Thumbs Up

Finance Minister Arun Jaitley on Monday presented a pro-poor, pro-farmer and pro-rural Budget in Parliament. The Budget also provided many reasons to cheer for the real estate and construction sector, as Jaitley announced a slew of measures, such as facilitating affordable housing by 100 per cent tax exemption for profits from small projects and encouraging small first-time home buyers by offering an additional tax benefit of Rs 50,000 on the interest paid on home loan. The minister also announced Dividend Distribution Tax exemption for Real Estate Investment Trusts (REITs).

In his post-Budget address, Prime Minister Narendra Modi said, “The housing sector will be strengthened and this will boost our dream of housing for all.”

Here's what sectoral experts and developers have to say about the Union Budget 2016:

Speaking on tax exemption for first-time home buyers, Ankur Dhawan, chief business officer (resale), PropTiger.com, said, “It is a positive move. It will help increase demand for affordable housing, thus making it affordable for the buyer. However, it is also important to check the supply of such homes, as there are very few affordable homes which come under Rs 50 lakh.”

J C Sharma, vice-chairman & managing director, Sobha Limited, said, "As far as the housing sector is concerned, it is the primary beneficiary ... The 100 per cent deduction for profits to an undertaking in housing project for flats up to 30 sq mt in four metros and 60 sq mt in other cities will encourage supply in the affordable housing segment. The exemption from service tax on construction of affordable houses up to 60 sq mt under any scheme of the Central or state government, including PPP schemes, is another step in the right direction."

Terming the proposal regarding REIT and Infrastructure Investment Trusts (INVITs) having specified shareholding will not be subjected to Dividend Distribution Tax (DDT) as progressive step, Sharma added that the deduction for additional interests of Rs 50,000 per annum for loans up to Rs 35 lakh sanctioned in 2016-17 to first-time home buyers would directly benefit both buyers and sellers and will perk up the market sentiments.

 Anuj Puri, Chairman & Country Head, JLL India, wrote in his column, “The finance minister has definitely made a concerted attempt to manage expectations with a balanced budget. While three of the real estate sector's major expectations -- increased HRA deduction, removal of DDT from REITs and boost to affordable housing by allowing 100 per cent deduction on profits made by entities constructing them -- have been addressed, the Budget offered no financial protection to home buyers from any project delays.”

Deepak Joshi, president and chief business officer, Religare Housing Development Finance Corporation Ltd, said, “This Budget is well-balanced as is is focused on ease of doing business, Make in India, infrastructure and social sectors. The Budget has laid out a clear road map to give impetus to the 'Housing For All by 2022' by announcing tax sops for both individuals and developers for affordable housing sectors. An additional tax rebate of Rs 50,000 to first-time home buyers, 100 per cent deduction of profit allowed to developers for construction of affordable housing and exemption of service tax for construction of housing units up to 60 sq mt is definitely going to give a push to demand and supply of affordable housing.”

Anshuman Magazine, CMD, CBRE South Asia, said, “Rental housing promoted with HRA (human resource allowance) support all those staying in rented homes.”

“It's a positive Budget for the sector but only Dividend Distribution Tax abolition will not boost REITs,” said, Sanjay Dutt, managing director, India, Cushman & Wakefield.

Abhishek Lodha, MD, Lodha Group, wrote in ET Realty that the focus on affordable housing would give much-needed fillip to develop a greater number of affordable housing projects across the country, thus directly aligning the agenda with the prime minister's vision of 'Housing for All'. “Increasing the limits on interest deduction on homes costing less than Rs 50 lakh and removing the Dividend Distribution Tax on REITs, both are welcome measures which will help boost the attractiveness of India's housing sector,” Lodha added.

Getamber Anand, national president, Confederation of Real Estate Developers' Associations of India (CREDAI), while speaking to the Economic Times said there had been a lots of rationalisation of taxes. Some sore points of the real estate industry such as harassment by excise department on ready-mix concrete being manufactured on site for self-use had been addressed in the Budget.

Dharmesh Jain, MD, Nirmal Lifestyle, while speaking to one of the property news channels termed the Budget as growth-oriented. He also said that Union Budget would boost demand and would put pressure on state governments to speed up approvals.

Rajesh Prajapati, MD, Prajapati Constructions, said the finance minister had offered sops to the affordable housing and pointed out that there was a definite direction laid out in this Budget towards implementing the ambitious Housing For All by 2022.

Meanwhile, terming the Union Budget 2016 a disappointing one for the industry in general and real estate in particular, R ​K Arora, chairman, Supertech, said, "The announcement of 100 per cent deduction for profits to an undertaking in housing project for flats up to 30 sq mt in four metro cities and 60 sq mt in other cities, approved during June 2016 to March 2019 and completed in three years, makes it mandatory to obtain all clearances and complete a project in three years. Further, the developer is liable to pay minimum alternate tax also."

He added that the addition of 0.5 per cent Krishi Kalyan Cess on all services would cause additional burden on home buyers who were already burdened with increase in local stamp duties and sector rate increases in addition to cost escalation.