24 January 2017

Union Budget 2017 - Colliers Wishlist for the Real Estate Sector

With the Union Budget 2017-18 announcement around the corner, here is our wish list from the upcoming budget for the real estate sector. 

  • Measures to boost ‘Consumption’ - We expect the government to initiate measures during the budget that boost ‘consumption’. A direct and immediate means of achieving that goal is to significantly reduce corporate and income tax, which gives companies and individuals more money in hand to spend.
  • Reduction in MAT rates - In the event taxes are reduced, we should expect Minimum Alternate Tax (MAT) rates to also come down, which has been a long-standing demand from Special Economic Zones (SEZ) developers and companies operating from SEZs.
  • Infrastructure development - The long-term lever for boosting the economy is to invest in infrastructure. We hope that more money will be spent on the Smart Cities initiative and a substantial portion of that will be utilized in upgrading the urban infrastructure.

  • Incentives for Industrial Corridors - Growth in manufacturing jobs is close to the government’s heart so we expect a boost for industrial parks and industrial corridors.

  • Single window clearance for real estate projects - We hope the government boosts ease of doing business in real estate by nudging states to adopt the long-standing demand of the industry to adopt a single window clearance.

  • Clarity on tax treatment under GST - We also hope that there will be more clarity on tax treatment under Goods and Services Tax (GST) for the real estate sector.

  • Implementation of RERA – Consumers are also keen for the central government to tackle the issue of dilution of Real Estate (Regulation and Development) Act, 2016 (RERA) norms by state governments.

  • Tax concessions and subsidies for Individuals - Other measures to fuel demand that we are expecting from budget are deduction on interest paid on borrowed capital for under-construction properties to commence from the year of borrowing; enhanced tax deduction limit for principal and interest repayments for home loans beyond the current limit of INR 2 lakhs.

Research View

Post demonetisation, the real estate industry expects the government to initiate measures during the budget that boost ‘consumption’. The challenge for the government is to grow the economy while maintaining fiscal prudence. The industry is fuelled by growth in the economy resulting in greater office off-take, residential sales, and requirement of other real estate asset classes. A budget that boosts growth is therefore good for real estate.

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