With the Budget 2015 is all set to roll out by end of this month, the industry waiting to see what kind of subsidies, measures or growth stimuli budget will bring for Real Estate. The sector is looking for various incentives and initiatives at policy levels. 2014 budget provide few handful measures like pass through of taxes for REITs, changes in FDI policy and tax incentives for end consumers. Although these changes have impacted the sector positively, to realize the actual benefit of these changes the sector expects few more initiatives at policy level.
With the agenda ’Housing for All by 2022’ on the priority list of the new government’s growth plans, the housing market seems to be the next big thing in India. The industry expect incentives like infrastructure status to housing sector, increase in FSI (Floor Space Index) tax incentives on construction materials, interest subsidies for the end-users, etc. Granting infrastructure status to housing will improve developer’s access to the long-term and short-term finance at competitive rates for housing projects. This will lower the development costs and enable the consumer to buy cheaper homes due to lower financing costs. Infrastructure status will also enable the sector to avail special incentives and tax breaks for creating affordable housing.
Secondly, it is essential for REITs to be tax efficient to fly in Indian market. The sector is hoping for removal of dividend distribution tax on distribution of profits by SPV to REITS, removal of TDS on distribution of income by business trust non-residents and exemption from stamp duty on transfer of asset to REITs. Recently, the government expressed their intent to revive special economic zones and also issued some procedural level changes to simplify the process of setting up a unit in SEZ, industry expect removal of the Minimum Alternative Tax imposed on SEZ which is making it unattractive for units to set up their shop.
On demand side, the key drivers are higher disposable incomes, attractive financing terms and stable employment scenario. Thus, the industry is looking for interest subsidies and measures to improve disposable income such as increase in deduction available under Section 24 to at least INR 300,000 and increase in limit for deduction for principal repayment to boost the residential sales.
Now, with all eye set on union budget 2015, the industry is geared towards boosting the confidence of all key constituents. Though partly rejoiced with the government pro developmental approach, the real estate sector is expected to gain the much-needed ground and gather steam for a better tomorrow.
Written by Surabhi Arora | Associate Director | Research