Much on expected lines, though this year’s budget does not unveil any big bang measures to give a giant push to the beleaguered real estate.
Yet, it aims to revitalise the economy, triggering investments through a series of reform measures. It also seeks to spur infrastructure and boost affordable housing, to provide a sigh of relief to the sector. In the absence of any largesse and quick fix solutions, the budget may look disappointing, but it is perfectly in line with the government’s philosophy that real estate should grow on the strength of the economy and follow the path of long-term, sustained and inclusive growth.
As infrastructure holds the key to the growth of real estate, as expected, the budget made a record allocation of Rs.2.31 lakh crore for roads, highways and railways, besides focusing on green field ports and upgradation of unused and under utilized airports and air strips.
As the trigger to start the investment cycle has to come from public spending, the budget has rightly focused on spending on basic infrastructure construction through multi-pronged strategy of establishing a Rs.4,000 crore National Investment & infrastructure Fund, a dedicated LIC Fund to provide credit enhancement to infrastructure projects, revitalizing public-private partnership (PPP) mode of infrastructure development and revamping dispute resolution mechanism The focus on public capital expenditure, is expected to help crowd in private investment, reports IANS.
The budget is fully seized of the ground reality that while commercial office real estate is on recovery path, residential real estate is still under lot of stress. Therefore, it lays emphasis on strengthening housing sector in line with government’s mission of ‘Housing for All’. And since most of the housing shortage is in low cost housing, the budget rightly stresses on affordable housing. To boost supply, the budget has incentivised private developers by making provision for 100 percent service tax exemption for affordable homes with sizes up to 30 sq metre in metros and 60 sq metre in non-metros. In order to encourage timely delivery of homes,the government has put a condition that developers can avail tax benefit only if they complete construction within three years. On the demand side, the budget has provided additional rebate of Rs.50,000 per annum on housing loan interest for first time home buyers in affordable segment, with loans not exceeding Rs.35 lakh and property value not exceeding Rs.50 lakh (though it is on the lower side in metros to realise full potential). The hike in the limit of deduction for rent paid under Section 80 GG of IT Act, will positively impact rental demand for affordable housing.
The exemption of real estate investment trusts (REITs) from Dividend Distribution Tax (DDT) will also give a fillip to affordable housing. Considering that rental housing can play an important role in the success of “Housing for All”, the budget has provided a much needed boost to it by hiking the HRA limit from Rs.24,000 to Rs.60,000 crore per annum for rented accommodation.
Further, with government firmly sticking to 3.5 percent fiscal target, going forward, the budget will provide enough head room for reduction in interest rates for home loans to boost housing. Already, in order to boost low cost housing, home loan takers are getting interest subsidy of 6.5 percent on loans up to Rs.6 lakh for economically weaker sections (EWS) through credit-linked subsidy component of “Housing for All”. And now in the budget, the lowering of corporate tax (for FY 18) for companies with below Rs 5.crore turnover, will boost housing finance companies focusing on lower income groups (LIG) and EWS segments. The budget has also addressed the important issue of bringing home prices within the reach of masses. .
