The Real Estate industry had listed a number of points that it wanted addressed in this budget. However, the Finance Minister made limited announcements that directly related to this sector. These included, housing units for rural and urban housing by 2022, tax incentives for REITS and InvITs, allocation of INR 150 crore for setting up of a world class IT hub and introduction of the Benami Transaction Bill.
Looking at the larger picture, this is a budget with a mantra to put the country on ‘a trajectory of fast track growth’, aiming for the ambitious double digit GDP growth rate. This will be a bigger boost, albeit indirect to the Real Estate industry than what a few industry related announcements would have achieved.
Key highlights of the budget from real estate perspective
Housing: Reaffirming the government’s commitment to “Housing for All by 2022” the budget announced 6 crore housing units. The Central Government will build 2 crore houses in urban areas and 4 crore houses in rural areas. This will promote home ownership in turn and boost the affordable housing sector. This will also help to fill the huge demand supply gap in the housing sector.
REITs: The budget proposes to rationalise the capital gains for the sponsors exiting at the time of listing of the units of REITs and InvITs, subject to payment of Securities Transaction Tax (STT). It is proposed that the sponsor will be given the same treatment on offloading of units at the time of listing as would have been available to him if he had offloaded his shareholding of Special Purpose Vehicle (SPV) at the stage of direct listing. Further, the rental income arising from real estate assets directly held by the REIT is also proposed to be allowed to pass through and be taxed only in the hands of the unit holders of the REIT.This will help to make REITs financially more viable and allow monetisation of operational assets and enable increased participation of retail investors in real estate.
Infrastructure: The FM highlighted that our infrastructure spending does not match our growth ambitions and thus has increased the budgeted capital outlay on infrastructure by 70,000 crore. The budget also announced various schemes such as Rs 25,000 crore to Rural Infrastructure Development Fund (RIDF); Rs 15,000 crore for Long Term Rural Credit Fund; Rs 45,000 crore for Short Term Cooperative Rural Credit Refinance Fund; and Rs 15,000 crore for Short Term Regional Rural Banks (RRB) Refinance Fund, etc. This shall enhance capital flow in infrastructure sector which will indirectly give impetus to the Real Estate industry. In line with the development of Industrial Cities along major industrial corridors, the FM allocated initial sum of Rs 1,200 crore for DMIC Corridor for the development of Ahmedabad- Dhaulera Investment Region in Gujarat and the Shendra – Bidkin Industrial Park near Aurangabad (Maharashtra)that are now in a position to start work on basic infrastructure. He has also promised to provide additional fund once project paces up.
Black Money: The budget proposes Introduction of new Benami Transactions (Prohibition) Bill in current session of the Parliament- This law will enable confiscation of Benami property and allow prosecution of those undertaking such transactions.Through this bill; the aim is to block a major avenue for generation and holding of black money. Also the budget proposes to amend the provisions of section 269SS and 269T of the Income-Tax Act so as to prohibit acceptance or re-payment of advance in cash of Rs 20,000 or more for any transaction in immovable property. It also proposes to provide a penalty of an equivalent amount in case of contravention of such provisions. This will help to curb the generation of black money in real estate and increase overall transparency in the real estate sector.
Another change that the FM made was to make it mandatory to quote the Permanent Account Number (PAN) for any purchase or sale exceeding a value of Rs 1 lakh. This will further help to curb the black money transactions in the sector.
Pre-existing regulatory mechanism to simplify multiple approval system: The FM expressed his intent to set up an expert committee on framing a regulatory mechanism to simplify the current system of seeking multiple approval from multiple bodies. This is step towards the single-window online approval system.
About the author
Surabhi Arora, leads the research team in India and has more than13 years of experience in carrying out multi-disciplinary research and analysis in the area of finance and real estate industry. Surabhi specialises in real estate economics, policies, commercial and residential real estate research with in-depth knowledge of market dynamics across major markets in India.