The real estate sector’s expectations of being accorded Industry and Infrastructure have been belied yet again.
Union Budget 2016-17 is a mixed bag for the real estate sector. Plans to meet the fiscal deficit target are a good move, since this will leave more headroom for the RBI to opt for a reduction in lending rates during upcoming rate review cycles. The additional exemption of Rs. 50,000 for housing loans up to Rs. 35 lakh – provided the house cost doesn’t exceed Rs. 50 lakh – is a welcome move too. Also, eliminating service tax for houses built in less than 60 square meters under Central or State Government schemes, including PPP schemes, will boost the affordable housing segment. Excise duty exemption on ready-mix concrete used in construction sites will also benefit the construction industry.
The Finance Minister’s proposal that any distribution out of SPV income to REITs and INVITs with specified shareholding not being subject to Dividend Distribution Tax (DDT) will spur investments in REITs, which had not happened till date since DDT was acting as a major deterrent for investors.
Nevertheless, other small and big measures that could have helped spur a revival in the real estate sector have been completely overlooked. To begin with, a change in income tax slabs was expected, which would have benefitted common citizens. Such a measure would have put more money in the hands of people, making it easier for them to purchase a property of their choice. Coming to the macro picture, the real estate sector’s expectations of being accorded Industry and Infrastructure have been belied yet again. Moreover, no attempt has been made to move towards single-window clearance. Furthermore, some cues were expected about firm action being taken to expedite GST Bill, but there was no mention whatsoever of this important legislation that has been pending for long.