Real estate industry to wait longer for single window clearance, industry status and real estate regulation bill
Gurgaon, February, 29, 2016 – In the backdrop of an uncertain global economy, the government proposed a budget that set in motion the foundations for a robust economy in the longer term. While in the past the government has made numerous announcements, however this time the budget looks to set in motion delivery of those policy statements
“It is a positive budget, with long term focus on job creation, entrepreneurship and skill development. For the short term, the real estate sector has not been completely ignored with clarity on DDT for REITs, tax benefits on rents, as well as house purchases below INR 50 lakhs; which would collectively give a boost for Housing for all” says Joe Verghese, Managing Director at Colliers International India.
“Housing for All” received an impetus with the announcement of tax breaks for affordable housing projects, tax relief for those not getting HRAs on rentals up to INR 60,000 per annum and additional tax break of INR 50,000 for first time home buyers. This along with the series of proposals under the ‘Housing for All’ scheme should further increase the supply of affordable homes. Further, the Finance Minister’s announcement of removal of Dividend Distribution Tax (DDT) for REITs will usher in the REITs and InvITs, allowing investment participation from the retail and institutional investor. However, more clarity is needed on implication on REITs over the point where the budget states a 10% tax on gross amount of dividends to be paid by recipients including individuals, HUFs and firms receiving dividend in excess of INR 10 Lacs per annum.
Further, Service tax exemption on construction of affordable homes up to 60 square metres, coupled with 100% deduction of profits of an undertaking constructing flats up to 30 square metres in four metro cities and 60 square metres in other cities will incentivise affordable housing construction in Tier I, Tier II and Tier III cities. Extending this benefit to Public Private Partnerships (PPP) schemes will also enable more public and private sector participation in this regard and will spur construction for affordable homes. The budget 2016 has focused substantially in boosting affordable housing construction by making construction lucrative, via major tax reforms.
However, the real estate industry that had pinned its hope on key announcements like removal of MAT in SEZs, implementation of the Real Estate Regulator Bill and single window clearance will have to wait longer for any action on these policies by the government. “The key to the budget lies in the implementation of the proposed policies. A year down the line we should evaluate the government’s performance based on the execution of what it has set out to do” says Amit Oberoi, Head of Valuation & Advisory at Colliers India.
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