Tuesday, 7 February 2017

How will Budget 2017-18 impact real estate sector?

The real estate sector, which was hit by the government’s demonetisation drive, got the much needed boost in the Union Budget 2017-18. Here are some of the key highlights pertaining to the real estate sector and their impact:


Infra status
The Affordable Housing sector has been granted the Infrastructure Status which has been a long time demand from the industry. This is in line with the Prime Minister 's vision of providing Housing for All by 2020. Giving an infrastructure tag to such projects would attract more investors. It would mean developers would have access to cheaper funding and thus addresses issues that private players in this segment face.


Loan refinance
National Housing Bank will refinance individual loans worth Rs 20,000 crore in 2017-18. This will give a major push to affordable housing companies.


Tax exemption
The Government has also proposed 1 year tax exemption from notional rental income from unsold inventory. This would help especially those holding real estate inventory/ stock. This is a great move to providing tax relief to developers in the residential sector where the sales have significantly dropped post demonetisation move.


Capital gains on JDA
Capital gains on Joint Development Agreement is to be taxed only when the project is completed. This would provide a great boost to unlocking land for development and reduce litigation.


Reduction in holding period
In case of Long term Capital Gains from Immovable properties, the holding period has been reduced from 3 years to 2 years to qualify for benefits of long term capital gains providing respite to investors.


Base year change
The base year for calculation of Indextation for long term capital gain shifted from 1981 to 2001. As a result of this resultant gain would reduce & in turn lower taxation.


PMAY get huge boost
The Government has allocated Rs 23,000 crore for the Pradhan Mantri Awas Yojna (PMAY) to propose to complete one crore houses by 2019 for those living in kachha houses.


Increase in size of affordable housing
In the last budget, the government provided 100% tax exemption on profits, for developers building homes with Built up area up to 30 sq meters in the four metros and up to 60 sq meters in other cities. The Government stated that instead of built up area, carpet area would be applicable.


Home loan rates
Rate of interest on housing loan to further come down.


Reduction in tax rate
For individuals, the income tax rate is reduced from 10% to 5% for tax slab between Rs 250,000 to Rs 500,000 which means any person whose income is up to Rs. 5 lacs, the tax liability will be halved. Any person whose income is above Rs. 5 lacs would have a net tax saving of Rs. 12,500.



Cash ban
It recommended a total ban on cash transactions of Rs 3 lakh and above.