BENGALURU | MUMBAI | NEW DELHI: The Union Budget 2017-18 has brought in a series of policy directives that are a positive move to the affordable housing sector, especially, the Government’s move to impart infrastructure status to this sector.
Finance minister Arun Jaitley also abolished the Foreign Investment Promotion Board (FIPB) which will provide the necessary impetus for FDI inflows across industries.
In a major relief to housing developers, the Finance Minister has changed the time period for calculation of notional rental on unsold stock held by developers for tax purposes, which will now kick in only 1 year after completion.
All these moves have been hailed by the real estate industry, here is how the industry player reacted to the announcement made in Union Budget 2017-18:
Joe Verghese, Managing Director, Colliers International India
Considering the impetus being given to road infrastructure, manufacturing and affordable housing, the government have put in all the required ingredients to incentivise urban decongestion and the development of new industrial cities around our industrial transport corridors.
Capital gains on Joint Development Agreement to be taxed only at product launch, 1 year tax exemption from notional rental income from unsold inventory and reduction of long term capital gains tax period from 3 to 2 years provide respite to investors/ developers of real estate. This helps 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.
Shashank Jain, Partner, PwC India
Subsequent announcements on increasing the qualifying unit area and the time frame for completion to 5 years are two great steps, acknowledging the practical and operational aspects. Area was too low to be called a decent unit and 3 years was almost impractical for completion of the project considering there is no separate approval process for affordable housing and one had no certainty of time taken just for approvals!
Milind Kothari. Managing Partner & Head of Direct Tax, BDO India
The move to provide clarity for taxation of Joint Development Agreement to the date of completion of project would provide a great fillip to unlocking land for development and reduce litigation.
Shrikant Badiga, Director, Phoenix Lifespaces
It’s a good move. Affordable housing should be encouraged under infrastructure which allows ECBs and more number of good companies to venture into affordable housing.
Rashmi Deshpande, Associate Partner on Real Estate, Khaitan & Co
Reduction in Income tax rate for basic slab: Will help broaden the tax net and also increase the disposable income in the hands of the tax payers coming within the category. This, coupled with the incentives on low cost housing and the reduction in interest rates by banks, is likely to promote thrust in the affordable housing segment.
Taxation of Capital Gains of Joint Development Agreement: The budget proposes to change the prevalent practice and has clarified that the landowner entering into a joint development agreement for development of the property, shall be subject to capital gains tax upon completion of the project. This is a significant change, which is much needed, to bring clarity on the aspect and avoid litigation with the department, which was invariably a norm given the current ambiguity.
Rohit Poddar, Poddar Housing & Development Ltd
This is a very positive budget for the affordable housing sector. Several practical points have been addressed that were previously limiting the creation of large scale supply
1. Infra status to the sector – this will allow specially the MSEM’s access to Capital and bank debt and hence improve the liquidity situation in this sector. Scale cannot be achieved by 3-4 corporates alone partaking in this sector and it has to involve the MSEM’s actively.
2. The tax holiday status for projects with apartments of a carpet area of up to 30 square metres in the municipal limits of the 4 metros and Upto 60 square metres for apartments located outside the municipal limits of metros and anywhere in other cities and towns, clearly defines the size and location of the project and apartments with no room for ambiguity.
3. The increase in time frame for tax free status of projects from 3 years to 5 years for project completion post approvals. It is also excellent as several affordable housing projects are townships that would take 5 years for completion
4. Income tax of 5% for income between 2.5 and 5 lakh will create more disposable income on the hands of the potential customer
Farshid Cooper, Managing Director, Spenta Corporation
The government has delivered for the real estate sector with announcements to focus on providing affordable housing and the easing of capital gains tax norms in the union budget. The raised allocation of 50 percent to the rural housing programme will help kick-start the much needed investment demand. Developers will now be eligible for several Government subsidies, incentives, tax benefits subsidies and institutional funding. The changes to the income tax slabs would positively affect disposable incomes and would help spur sales on the real estate market,” said Farshid Cooper, Managing Director, Spenta Corporation.
Avneesh Sood, Director, Eros Group
The government has yet again presented a Budget that will bring about a cheer to the masses. From favourable changes in the personal income tax structure to heavy investment plans for the infrastructure along with the according of infra status for the affordable housing segment and so much more, real estate sector is sure to directly and indirectly benefit from this budget in the near future. Amongst the big decisions, an outlay of almost 4 lakh crore has been planned for infrastructural development across the country, no tax for earners upto INR 3 lakh a year and no property tax for developers on unsold inventory till one year after completion certificate is issued. With such announcements, we are projecting the demand for budget housing to multiply that will also allow a positive drift in the momentum for the realty sector.
Deepak Kapoor, President CREDAI-Western U.P. & Director, Gulshan Homz
Announcement of infra status for the affordable housing segment in the Budget will open up new avenues for the developers planning to offer budget housing units and will make it easy and comfortable for them to get finance from lending agencies. Affordable housing developers will now be eligible for various government incentives and subsidies, where this infra status could also mean that the government might come out with land parcels for such development in future. With the basic slab of income tax now reduced to half the effect, people will have access to higher disposable income which can now be utilised for saving and investment purposes, where real estate will look attractive. Also, to promote foreign investment in the country, FDI is planned to be liberalised further.
Rakesh Yadav, Chairman, Antriksh India
The popularity and acceptance of this budget was clearly visible for the realty sector as we saw the real estate stocks driving the day in the share market. The decision of granting infra status for the affordable housing segment along with the rebate in personal income tax announced by the government will provoke the developers to shift their gears and develop affordable housing projects; which is now sure to meet the demand as well. One major issue faced by various builders across the major Tier 1 cities of the country is the inventory pile up. The tax break up of one year post the receipt of the completion certificate for the project, for the unsold stock, offers a slight breather for the builders. Overall, this budget looks quite favourable for the realty sector and its buyers in the long run.
Rajesh Goyal, Vice President CREDAI-Western U.P. & MD, RG Group
As anticipated, a populous budget has been announced by the government which will allow the young generation to save more and invest further. This budget saw the government offering several benefits to the realty sector, at the same time missing out on a few important decisions. Single window clearance system is still not implemented across the country which is hampering the delivery schedule of the developers. Amongst the major hits, the criteria for affordable housing has been changed from built up area to carpet area basis. This will allow affordable housing segment to look more lucrative for both, developers and buyers. With the income tax rebate for the first slab and affordable housing incentives in place, we will now observe the youth of the country looking out at realty sector as an avenue for investment or residing.
Abhishek Bansal, Executive Director, Pacific Group
With today’s budget announcement, the affordable housing segment and the retail industry will see the biggest boom. The moment tax structure is simplified and relaxed, the spending power of people increases and this spending is directly contributed towards either savings or investments. Although, the young earning age in India is expected to spend and invest more rather than save, thus retail industry will witness increased footfall in the upcoming financial year. Real estate sector on the other hand, will benefit from the affordable housing development and hence, developers will now be eager to plan accordingly. Buyers interest will now shift towards low budget houses as these units will now come with a reduced price tag with the developers gaining access to easy finance from lenders; well supported by recent rate cuts and announcements.
Ashok Gupta, CMD, Ajnara India Ltd.
With a mammoth budget investment plan for the infrastructure of the country announced, various untapped regions will gain connectivity with major cities. This development will further broaden the avenues for realty development across the country. Affordable housing has yet again been the prime target of the government as it looks to fulfil the dream of housing for all. With the initial tax slab relieved and infra status announced for the affordable housing segment, upcoming project launches will witness majority of affordable projects. In a nut shell, this budget will provide a massive thrust to India’s realty sector which has been picking up pace gradually over the years.
Ashwani Prakash, Executive Director, Paramount Group
Union Budget 2017-18 was likely to give some respite to the realty sector and it was highly expected that this sector might get industry status this year, but this has not happened. However, the FM has still taken an appreciable step in giving infrastructure status to affordable housing and increasing the scope of the same. The decision of increasing the period of completion for affordable housing projects from 3 to 5 years is also a welcome move. Reduction in interest rates for home loans is already in place, relaxation in the individual tax limit would also encourage the home buyers to come forward.
Pradeep Aggarwal, Co-Founder & Chairman, Signature Global
Driven with the view to provide houses to all at affordable rates, government’s move to grant infrastructure status to the affordable housing segment in the country along with the relaxation especially in the first slab of the personal income tax will not only spur growth in the construction of affordable housing but also enhance the demand for the same. As the disposable income increases, people will be inclined to invest towards property. With the lending interest rates lowered and purchasing power increased, we will witness a steep rise in affordable housing demand across the country, which will now be well met with the upcoming supply.
Ashish Shah, Chief Operating Officer, Radius Developers
Union Budget 2017 has brought a much needed relief to the nation and specifically to the real estate sector as a whole. Awarding of infrastructure status to affordable housing will certainly pave the way for growth of the real-estate industry. This additional support will help us move closer to the vision of ‘Housing for All’ at a much faster pace. The community is especially appreciative of the tax benefits that has been attached to the sector, specifically in the form of Capital Gains Tax benefit. The reduction of the time limit from 3 years to 2 is a boon for most investors, the consolidation of Capital Gains tax on joint venture projects only after the completion of the project also encourages join development ventures. The relief of 1 year provided for taxation on notional rent income is also a big boon for the sector across ongoing projects. All in all, Union Budget has brought the right mix of elements from housing, finance and taxation to create an effective ecosystem that bodes well for the growth of the sector and economy in the coming fiscal year.
Amit Wadhwani, MD, Sai Estate Consultants
The real estate and infrastructure sector has seen constructive steps across the budget to reduce costs for developers and attract more investors . The allocation of Rs 3,96,135 crore for infrastructure will indeed give real estate the much needed impetus to re-monetise the sector in the current situation. This will specifically allow access to capital and bank debt, while improving liquidity situation in the sector. The tax relief for projects with apartment of a carpet area of upto 30 sq mtrs in municipal limits of 4 metros and upto 60 sq metres for apartments located outside municipal limits of metros clearly defines size with no ambiguity. Net net, affordable housing now given the status of infrastructure will increase certainty in buying behavior. Empowering PSU banks is also a move in the right direction as interest subvention in home loans will trigger higher subscription to cheaper loans in turn lead to better real estate absorption. Also, the change in the tenure of capital gains from 3 years to 2 years is a positive move over all for the industry. Re-sellers will now have to mandatorily deploy the funds from the sale of property into another within a span of 2 years. Ready possession units will get an impetus and the available unsold stock across the nation with get absorbed faster. On the other side, developers will see the incentives in terms of pricing and organized payment if they are able to offer more ready stock versus aiming to sell during a ‘pre-launch’ stage which passes huge risk onto the consumers. Budget 2017 is a win-win for homebuyers, investors, banks and real estate players. The new status will augment resource allocation for the sector, which in turn will improve housing supply and reduce huge demand backlog. The government would need to re-define affordable housing or low-cost housing clearly and ensure that funds from these projects are not withdrawn before its completion.
Prashant Tiwari, Chairman, Prateek Group
Finance Minister announced that the project will now be sold on the basis of carpet areas that will help the buyers know the exact area that they are getting. Focus of the budget is on infrastructure development including airports and roads, this will help in healthy growth of real estate sector also. Announcements like new FDI policy under consideration and tax relief on unsold stock as liability to pay capital gains will arise only in the year a project is completed will give boost to the sector”.
Gaurav Gupta, Director, SG Estates Ltd
Good Budget for Real Estate perspective because of complete clarity on affordable housing. The criteria for low cost / affordable housing has been changed from built-up area of 30 / 60 sq mtrs to carpet area of 30/60 sq mtrs, thus making the low cost – affordable housing segment more lucrative for us and also making the segment more attractive for the buyers. With the change in criteria from built-up area to carpet area, the purchasers get more spacious homes and the builder is able to market the property to a larger segment of buyers. Also areas like Ghaziabad, Faridabad, Noida etc will now be able to get incentives of the scheme by making houses upto carpet area 60 sq.meter (650 sq.ft) as against 30 sq.meter earlier. Infrastructure status has been granted to affordable housing thus ensuring more liquidity for the real estate and access to funds at lower costs. This will motivate more builders to develop affordable housing units which is the need of the country. Project completion time under affordable housing scheme increased to 5 years as against 3 years earlier, thus making it more practical. Tax arising on unsold inventory given some breather by making it applicable post 1 year of completion. However, the FM did not touch upon increasing the tax exemption limits on housing loans or single window clearance or GST rules regarding real estate sector. We hope these things will be touched later.
Akshay Taneja, MD, TDI Infratech Ltd
We welcome the infrastructure status being given to the affordable housing sector, it will help achieve the target set to cater to this most important segment, which is the need of the hour. We will now see more of such projects being announced in the recent future. With this announcement, the banks will now lend more to projects in the affordable housing segment. Another budget announcement that will help the real estate market is the announcement of focus on making airports in tier II cities through PPP model. This announcement will lead to more housing and real estate projects come up in the vicinity of the airports in these cities.
Navin Makhija, Managing Director, The Wadhwa Group
The Union Budget 2017-18 has struck the right chord keeping the long-term objectives in mind, and we believe that it will bring positive improvements and lead to a progressive growth in the Real Estate Sector, particularly affordable housing. The government has successfully managed to address the housing needs of millions by increasing the allocated amount to the affordable housing to Rs 23,000 Cr, and we look forward to capitalizing on this. This move will certainly boost the sector and make affordable housing a reality. Moreover, the decision by the Finance Minister to grant Infrastructure status to affordable housing will incentivize developers to construct more budget homes. With the new status, developers stand to receive tax benefits, subsidies and gain access to institutional funding and land specially released for affordable housing in prime locations. This move will result in the increased supply of homes in this category. Developers will also be able to secure faster clearances and funds for expansion plans and various projects. The infra status grant is a win-win situation, for both, buyers and developers. Affordable Housing now becomes a priority lending sector for banks resulting in easier and lower funding for home buyers. We expect that there will be faster project execution and stringent payment methods will increase transparency and bring much-needed credibility to the sector.
Dharmesh Jain, CMD, NIRMAL LIFESTYLE and President, CREDAI-MCHI
Budget 2017 is a very good growth oriented budget. Infra status for affordable housing is an excellent move and is welcomed by all the developers . Increasing the limit of affordable housing to 30 and 60 metres carpet in non-metro area is great and developers would request the CM to extend it further to metro areas as well. Smaller companies and also the corporate tax benefits is again going to benefit large number of companies across the country. Over all great efforts have been put into infrastructure which will boost economic activity. Budget will favour the economy in the upcoming months of this year. Cost of capital on affordable housing will come down and affordable housing will have access to long term funding which is critical in the current situation and benefit the customers.
Ashoo Gupta, Partner, Shardul Amarchand Mangaldas & Co.
The Government’s decision to grant infrastructure status to affordable housing will spur the accomplishment of the objective of Housing to All by 2022. It will boost cement, steel, construction industries as well as employment and surge launches of new real estate products across the country.
For implementing its decision, the Government requires formulating a policy for social housing and setting out models on how land at low cost can be provided to developers for constructing affordable housing. It is essential to reach out to all segments of the society and not restrict the benefits to low income or economically weaker sections. A fast-tracked approval process for housing projects, clarity on the definition of ‘affordable housing’ for metros as well as Tier II and III cities across the country, access to cheaper funding to home buyers, higher tax exemptions on housing loans without restrictions regarding the size of the apartment, or the size of the loan will also boost the real estate sector.
Anand Piramal, Executive Director, Piramal Group
Over the past few months, we witnessed the build up with demonetisation, RERA, and REITS, and today, the finance minister has made some key announcements for the real estate sector in this budget, giving the industry the desired push. It is heartening to see affordable housing get the Infrastructure status, which along with the increased completion timelines will significantly pave the way for ‘housing for all’ to become reality by 2022. The one year tax exemption post completion of project definitely comes as a breather. Along with other major announcements – decreased lending rates and the proposed changes in capital gains, will help with liquidity issues and those holding inventory.
Another major discussion point during the budget, GST is expected to the lower the tax burden, potentially resulting in lower construction costs, which will benefit end-users. Since the real estate sector shares a positive relation with more than 250 other sectors, the impact of GST on each sector will have an indirect bearing on real estate. It would have been gratifying to see the real estate sector receive an industry status in this budget. However, given the potential growth that these announcements are likely to augur, we feel optimistic about the impact on our industry.
Jitendra Mehta, Director–Finance & Accounts, Kanakia Spaces
It is a welcome budget for real estate sector. Government’s proposal towards reducing Capital Gain Tax to 2 year shall facilitate in investors exploring investment opportunities in real estate sector leading to the revival of the secondary market. Government doubling lending target upto Rs. 2.44 lakh crore shall facilitate banks to increase home loans sanction in the coming years which will boost the buyers’ sentiment towards real estate investment. Re-financing is a major step that will increase availability of funds and competition will keep rates reasonable in the market. Affordable housing getting infra status is a progressive step towards resolving issues such as loan restructuring and funding costs.
Dhaval Ajmera, Director, Ajmera Realty
Expenditure aim towards development, Economic growth and Revenues are expected to generate from the passage of GST. Budget 2017-18 is largely focussed towards pushing Infrastructure growth to affordable housing. As per budget, No build up area is going to be counted and size for tax relief is up by 30% so it’s good news for affordable housing segment however mid segment has completely been ignored instead of counting the built-up area of 30 and 60 sq.mtr , it will be the carpet area of 30 and 60 sq.mtr. of the houses that will be counted under the scheme. 30 sq.mtr. limit will apply only in case of municipal limits of 4 metropolitan cities while for the rest of the country including in the peripheral areas of metros, limit of 60 sq.mtr. will apply. The holding period for considering gain from immovable property to be long term from the present 3 years to 2 years. National housing Banks refinancing individual loans worth Rs 20,000 crore in 2017-18 would be an advantage. Appropriate decision by Finance Minister by cutting down the holding period for land and building to 2 years from 3 years. This move will significantly reduce the capital gain tax liability while encouraging the mobility of assets. Government also plan to extend the basket of financial instruments in which the capital gains can be invested without payment of tax. Personal tax (IT) is reduced to 5% for the individual’s bracket between 2.5l to 5l. 50% saving in Income tax on earning up to RS 5 lakh So EMI bracket can be increased of home buyers which should prove to be an advantage. Additionally reduction in Home loan Interest rate (8.60% from 9.10%) and now reduction in Tax rate to 5% is definitely going to help home buyers take a decision.
Jaffer Ali, Founder and CEO, PropUrban
Besides doing the much required ‘clean-up’act, Budget 2017-18 gives major boost to the affordable housing and infrastructure sectors. The fact that Affordable Housing has been given the infrastructure status is commendable and will go a long way in fulfilling the “Housing for All by 2022 vision of the Government.
Additionally, by making the carpet area for low cost housing equivalent to the previous built-up area is a step in the right direction which will attract not just builders but also the buyers as they get more spacious homes.
Further, NHB allocation to refinance individual loans worth Rs 20,000 crore in new fiscal is another advantage to the affordable housing.
The Government’s move to lower the tax limit for people in the Rs 2.5 to Rs 5 lakh salary slab by 5 % will encourage more young buyers to take the plunge since there will be more disposable income at their hands. This coupled with recent lowering of interest rates will further infuse positive sentiments in the sector at large.
Additionally, the move to tax capital gains on JDs upon completion of the project, which was earlier ambiguous, will bring in more clarity and avoid litigation with the department.
In addition to improving the existing infrastructure across the country, the significant increase in the allocation of funds to this sector will also help in the development of new industrial cities in and around the industrial transport corridors.
Inching towards greater transparency and professionalism within the realty sector, the move to curb cash transactions above Rs 3 lakh will be a major relief for several domestic as well as NRI home buyers.
Abhishek Lodha, MD, Lodha Group
This is a budget which will enable empowerment of middle-class India, improving lives of millions. Reduction in Income Tax rates both for earners up to Rs. 5 Lakhs and MSME’s, will help in increasing their purchasing power and shall also impact demand for affordable housing positively.
More importantly, the simplification of rules qualifying affordable housing, tax holiday under 80 IBA and infrastructure status to this segment are significant positive moves by the government. These initiatives will in turn boost the overall economy as there will be more participation by developers in this area.
Reduction in home loan rates has already proven to be beneficial for housing demand and it will further increase with the help of above measures.
Amit Kumar Agarwal, CEO, NoBroker
The Budget has brought some welcome news for the start-up ecosystem in the country by increasing the tax exemption period for start-ups from the current 3 years, to 5 years. Taxing early stage starts is a major growth deterrent and the move to increase the tax holiday will boost the ecosystem and facilitate the risk taking capacity of start-ups. However MAT (Minimum Alternate Tax) of 18.5% will still be applicable on start-ups in this period. We recommend exempting start-ups from MAT in this duration, as that would ensure a complete tax holiday and financial encouragement.
Om Ahuja, CEO, Residential, Brigade Group
Union Budget 2017 clearly highlights Government focus and thrust on Housing sector in India. First time ever in the history of India, union Budget has rolled out multiple initiatives for housing industry giving serious boost to the sector and employment in the sector.
Affordable housing getting infrastructure status will significantly boost the development, provide finance at attractive rates, make the “Housing for all by 2022” government mission possible. Extending the time horizon for project completion from 3 years to 5 years to avail tax benefits for developer will help more developers look at this segment seriously.
Long Term capital gains applicability for holding period of real estate was 3 years before and now reduction to 2 years will considerably improve the sentiment in the market and help customers realise gains earlier with relaxed indexation benefits.
Increasing the area of affordable housing from 30 & 60 sq mt built up area to 30 & 60 sq mt carpet area will bring logical meaning to the consumer by providing extra approx 25-30% more space in this category. Big boost to the common man and affordability.
Finer points like taxation applicability in Joint Development Deals after completion of project will help in improve the industry business dynamics.
New proposal of Presumptive taxation on affordable housing unsold units applicability after 1 year of reviving occupancy certificate will help the industry in looking at affordable housing seriously.
M. Murali, Managing Director, Shriram Properties
I would say, this a well balanced, mixed and a progressive Budget coming in the wake of series of reforms which aimed at increased transparency, elimination of corruption and growth of digitalisation. The budget reflects the efforts of the Government to continue the reforms, yet, keeping in mind the welfare of the weaker section of the society. Focus on farmers and rural spending to encourage rural employment is most welcome, as India being basically an agrarian economy.
The budget shows that we are on path of fiscal consolidation – fiscal prudence without compromising on public spending – with Fiscal deficit pegged at 3.2%. Infrastructure allocation of 396000 crs shows the concern of the Government for suffering infrastructure development in the country.
Granting infrastructure status to affordable housing will provide a big boost towards accomplishing Housing for All Mission. There shall be considerable increase in volume of construction activities across the country. Other reliefs in terms of project construction period, tax reliefs, definition of affordable housing size will also go a long way.
Proposal to build 1 Cr houses to people who live in Kuttcha environment is not only a big social step to address the problems of the urban poor but also an economic step in as much as housing development sector in India is always employment and job intensive.
Boman R.Irani,Chairman & Managing Director, Rustomjee Group
“Granting infrastructure status to affordable Housing is an extremely positive step and it will act as catalyst to meet the Governments objective of Homes for All – 2022. This move will also be helpful in increasing access to low cost capital allowing developers to lower costs of Homes for buyers.
Real estate sector as an asset class for the investors by the bringing down the Long term capital gains tax benefits on housing from 3 to 2 years. This is reasonably good news for investors in Real Estate – this will allow more investments to be made in the sector & allow for moderate to good returns from property investments.
The government has gone back to the basics and taking the required steps to reinforce foundations like agriculture, housing, credit, medical care, cleanliness, skill training and infrastructure targeting the bottom of the pyramid. Rather than having quick fixes, it seems focused on measures that provide long term benefits to all.
This is a good budget for the real estate, infrastructure among other sectors and will help create many jobs and accel.
Rajesh Krishnan, CEO, Brick Eagle
The Affordable Housing sector could not have asked for a better budget. The Union Budget for 2017-18 has brought in a series of policy directives that are a positive move to the Affordable Housing Sector. Especially, the Government’s move to impart infrastructure status to this sector. It’s been a long standing ask that has finally materialized. We have affordable housing projects in Maharashtra, Tamil Nadu, Gujarat and Rajasthan. Conferring infrastructure status will make borrowing for projects easier due to longer tenures of loans and better terms. The government has already eased norms for registered FPIs for investment in the infra sector (subscribe to bonds issued by unlisted infra companies) which will prove beneficial to the Affordable Housing Sector. Extending the project duration from 3 to 5 years to avail the tax break under section 80-IBA of Income Tax Act, is another major move in favour of developers. These steps will lead to a multifold increase in affordable housing. For the affordable home buyer, rates are likely to come down further with The National Housing Bank (NHB) taking on incremental 20,000Cr refinance. Also, increasing the loan tenure for CLSS from 15 to 20 years would lower the EMIs, thereby enhancing affordability. Not forgetting, increasing allocation to PMAY to Rs. 23,000 Cr which will further boost this sector.
Rahul Shah, CEO, Sumer Group
In Arun Jaitley’s speech on Budget 2017-18, one of the much needed changes in the real estate sector was that the affordable housing will be given infrastructure status which is likely to result in increased participation from private players like us. The allotment of infrastructure status would boost investment from private players in the affordable housing campaign. It’s a good move by the government.
Real estate Investment Trusts (REITs) will open ways for the realty sector to get easy funding and ensure timely completion of projects. From our perspective, it would be beneficial if home buyers can come under the lowest possible slab of the GST, thereby, enabling greater affordability for potential home buyers.
Tushad Dubash, Director, Duville Estates
The Union Budget presented by Finance Minister Arun Jaitley is a people’s budget where Affordable Housing has been the focus and will be given infra status. This bodes well for home seekers living in tier II and tier III cities, which is also in line with government’s vision of ‘Housing for All 2022’.
Also, since affordable housing will now be given infra status, we can look at funding through insurance companies, which is a huge alternate sector and opens up a new avenue for real estate funding.
Demonetization has impacted the real estate in the short term. But on the flip side, we see banks flushed with funds and given the surplus liquidity that they presently have, we look forward to banks further lowering their home loan interest rates to customers.
The reduction of the period for long term capital gains tax coupled with reintroduction of capital gains tax saving investments will attract more landowners to capitalize on their land holdings, thereby bringing more land into development.
The Prime Minister recently announced a subvention scheme which is tailor made in attracting a wider audience base of home buyers. Huge allocations proposed for the housing and infrastructure sectors will set the pace of housing our populace at a much quicker pace and developing our infrastructure to align with our vision of ‘Housing For All 2022’.
Vidip Jatia, Director, Belmac
The overall Budget has had good incentives for the real estate sector. Increase in government spending on infrastructure to 65,000 cr will boost real estate space in metro and rural india. 2,000km of coastal roads will decongest metros and improve connectivity. The focus of our government on infrastructure will give a boost to the realty space in India.
The Budget 2017 has been a boost for the real estate space. Our Hon. Finance Minister Mr. Arun Jaitley continuously emphasised on the importance of infrastructure to drive demand in the country. The continued focus of increasing the connectivity via new road, metro and coastal road projects will not only improve congestions in metros but will also have a positive impact on going the periphery parts of the metros.
Income tax reductions from 10% to 5% for individuals earning between 2.5lakhs to 5lakhs per annum will help in financial inclusion in the system thus increasing the demand in the realty space. This will have a cascading impact to boost demand in the sector. Individuals who were outside the banking system earlier will all be included in the system thus increasing consumerism in the country.
The government is focused on its target of Housing for all by 2022. Various incentives such as prolonging capital gains tax for developers, income tax incentives, interest subvention schemes, etc. by the government will help drive demand for homes.
Deepak Kapoor, President, CREDAI Western UP
One of the best thing to happen to real estate sector is the industry status being given to affordable housing. This will help in increasing liquidity as banks will be more keen to extend loan to the developers for affordable housing. To promote affordable housing, the Finance Minister said that the scheme for profit linked income tax exemption for promoters of affordable housing will be broad based. Instead of built-up area of 30 and 60 sq. mtrs., the carpet area of 30 and 60 sq. mtr. will be counted. Also the 30 sq. mtr. will apply only in case of municipal limits of four metropolitan cities while for the rest of the country limit of 60 sq. mtr. will apply. Another practical aspect and respite to the developers is that the houses to be built under affordable housing can now be completed in five years after the commencement of work as against the three year period earlier.
Bijay Agarwal, MD, Salarpuria Sattva Group
The Union Budget is inclusive and progressive. It will put the country on track for vibrant economic growth in the future. We welcome the government’s step towards improving the existing road infrastructure and the new metro rail policy is right step to enhance connectivity and decongest urban areas.
Now, with affordable housing being provided an infrastructure status, it will give an impetus to the Central Government’s mission of achieving ‘Housing for All by 2020’. Further, change in the unit area from built up area to carpet area will bring more projects under its ambit and extension of completion timeline from 3 years to 5 years is a welcome step.
Also, clarification on the taxability on JDA transactions arising only in the year of completion of the Project is big relief to the real estate sector.
Relaxation on LTCG on immovable property by reducing the holding period to 2 years and shifting of base year to 2001 for the purpose of indexation will bring down the capital gain liability in the hand of the owner and liquidity will improve.
However, we would have appreciated further reduction in interest rate & increase in exemption limits for home loan buyers.
All in all, we welcome the budget’s underlying theme which has the vision for good governance and overall growth of the economy.
Ravi Ramu, CEO & MD, VBHC
Affordable Housing has secured the long-awaited Infrastructure Industry status. This is a big gain for our industry and will result in the attendant benefits of securing longer-term and cheaper funding; a much required boost.
The change in the capital gains tax incidence from the beginning to the end of a project with respect to Joint Development Agreements will also prove an important impetus to such projects by reducing the cost of land to the developer.
Sandeep Runwal, Director, Runwal Group
The focus of the Union Budget 2017 on making affordable housing an infrastructure status is a very positive move by the government in order to ensure Housing for All. The scheme for profit linked income tax deduction for affordable housing is also very encouraging for both consumers and the real estate sector, as the demand for homes will rise. The proposal for the National Housing Bank to refinance individual housing loans of about Rs. 20,000 crore in 2017-18, will certainly alleviate the burden of consumers considering buying homes in the near future. While the Government has proposed to construct 1 crore houses for the homeless by 2019, it would have been apt to also consider a similar initiative for the metro regions too, where a large part of the population is based today.
Rohan Agarwal, Managing Director, Geopreneur Group
For Long Term Capital Gain on Land & Building, period of holding is reduced to 2 years from 3 years. Also, the base year for indexation is proposed to be shifted from 1.4.1981 to 1.4.2001 for all classes of assets including immovable property. This will help reduce capital gains for many owners who sell their property. This change will encourage investment in Real Estate.
To promote Affordable Housing Scheme , profit-linked income tax deduction is changed to carpet area instead of built up area of 30 and 60 Sq.mtr. will be counted for making the deduction. This will extend the benefit to those with bigger houses.
The 30 square meter limit will apply only in case of municipal limits of 4 metropolitan cities while for the rest of the country including in the peripheral areas of metros, limit of 60 square meter will apply.
Anita Arjundas,Managing Director & CEO – Mahindra Lifespace Developers Ltd
The Union Budget 2017 has demonstrated fiscal prudence while placing a strong emphasis on infrastructure building and in addressing the housing needs of rural India and of specific income segments in urban India.
We welcome the conferment of infrastructure status to affordable housing, which can improve resource allocation to the sector, thereby reducing cost of capital for developers. Moreover, the changes under Section 80 IB with respect to size of units (built up area to carpet area), timeframes for project completion (3 years to 5 years) and geography (upto 60 sq.m. beyond the 4 metros) will encourage greater participation by organised developers in the affordable housing segment, thereby catalysing development and reducing the supply gap.
Interest subsidies announced last year under PMAY and further broadened during the recent address of the Prime Minister will further help reduce cost of home ownership for the relevant segment. Enhancement of budget allocation under PMAY and to NHB will greatly help finance these segments.
Overall, the focus accorded to housing and infrastructure will provide impetus to accessibility, connectivity and job creation, which bodes well for the nation’s economy.
Gagan Banga, Vice Chairman & MD, Indiabulls Housing Finance
The Government is on a fast track mode – building a sustainable ecosystem for both developers and home buyers. With the Infrastructure status bestowed upon the affordable housing segment, the cost of borrowing is expected to reduce for developers, thereby boosting the supply of affordable houses in the country. Furthermore, by increasing the PMAY allocation to 23000 crore, redefining affordable housing by carpet area & the previously announced subsidies, the government has laid down its intention to provide Affordable Housing the best possible boost. Also allowing property owners the benefits of capital gains after two years will also boost ownership in a country where real estate is still the most trusted investment option. This is a great budget for stakeholders across the Housing Sector.
Mudhit Gupta, CMD, EMGEE Group
The budget 2017 is an extremely positive budget aimed at giving benefits to the masses and weeding out unaccounted cash from the system. In the real estate sector , the thrust has clearly been on the affordable housing sector. Giving infrastructure status to affordable housing is a game changer. This will reduce the borrowing costs substantially with much lower interest rates , it will not only open doors for investments from abroad but also increasing the lending threshold by the banks since now they will be able to fund purchase of land as well. This benefit will be passed to the home buyers thus reducing the cost of the homes in this sector. By increasing the tax free limit from 2.50 lacs to 5 lacs, it will increase the number of people filing tax returns thus increasing the universe of home buyers for loans. Also the extension of the tax exemption to developers of affordable housing from the current 3 years to 5 years will further incentivise more developers to enter into this segment.
Rohit Gera, Managing Director, Gera Developments & VP, CREDAI – Pune Metro
On the whole the budget has a number of positive aspects. Given all the allegations about populist budget in light of the upcoming state elections the government has shown tremendous focus and has proved the naysayers wrong by not providing a bunch of sops for the upcoming elections. The move to reduce the maximum gap on cash donations to political parties buy 90% to Rupees 2000 is also a welcome move.
The reduction of income tax for small and medium enterprises with the turnover of less than 50 crores to 25% is a positive move as is the reduction of tax for the sub 5 lakh segment. The impetus on infrastructure development with a large capital deployment for the same will reap benefits in the short as well as long term.
With regards to the real estate sector, there are a number of positives such as the reduction of holding period for long term capital gain as well as clarification on the date of tax in case of joint development and the increase in the period required to complete the projects for the sub 60 square meter segment. Unfortunately, the steps taken will not be enough to kick start the real estate sector which is one of the engines of the economy.
The announcement of according infrastructure status to affordable housing projects will truly only see a big impact if these lower cost funds are actually made available for acquisition of land. Without this, a large part of the funds required for the affordable segment for the construction are provided by the end consumer and large scale capital is not required once the land acquisition is completed and approvals are in place.
Sandeep Shukla, Head-Marketing and Communication, Jaquar Group
The Government has announced several positive growth-oriented initiatives in this ‘no-shock’ Union Budget. We welcome the Government’s step to grant infrastructure status to affordable housing. The new status will help enhance resource allocation for the sector to meet the growing demand for housing. The various incentives, subsidies, tax benefits and institutional funding offered to developers will further boost the real estate and construction industry across the country and in turn benefit the economy at large.
Sukraj Nahar, CMD, Nahar Group
The government has expressed the vision of housing for all by 2022 so in that sense the budget showcases a long term vision. We are hoping that the government should sound action plans that would follow their intent expressed. It was vastly anticipated that the budgets would arrive at correcting the market drawbacks as a whole. However mid segment, which is the largest seem to have been ignored, leaving little room for the property prices to be within reach of the common man and would remain high compared to the average income of individuals. The tax relief given to developers who are constructing inventory less than 30 sqmtrs per unit to around 40 sq mtrs doesn’t help much either since most of the buyers are looking for houses ranging from 350-450 sq ft carpet from the mid-income individual’s view point that too in Metros or even Tier II cities. Hence this does not provide any boost in terms of end user sentiments.
I wish, however, that more steps had been announced to curb the regeneration of black money. Now that the cash has come into the banks, it is critical that the process of regeneration is addressed. Without this, it is a matter of time before the cash economy flourishes again.
Shubika Bilkha, Business Head of The Real Estate Management Institute (REMI)
The Budget 2017 as announced by the Finance Minister Arun Jaitley is a largely populous budget premised on an increase in capital expenditure across a number of key categories. The real estate and infrastructure sector has seen a favourable outcome across this budget. This is essential to improve the sentiment across these sectors. The budget provides a boost to the infrastructure sector with a significant increase in integrated capital expenditure. Additionally, with the premise to deliver 1 lakh rural homes and promote the affordable housing sector to infrastructure status, as well as revise the affordable housing definition to a carpet area of 30 sq m and 60 sq m, the budget gets us a step closer to deliver the Housing for All agenda. Additionally, with a large number of developments taking place through the JDA scheme, taxation on the year of completion is an added relief to the real estate sector.
The reduction in long term capital gains from 3 years to 2 years with 2001 as a base year of indexation could be viewed as a step towards enhancing the secondary market. The Budget has implied a number of measures that could potentially increase job creation and increase the money in the hands of the consumer through lower tax rates in certain income bands, which could positively impact the overall buyer sentiment in the real estate sector. The Budget has confirmed the roll out of the GST but however has refrained from touching on the multiple taxation under REITs that could provide an additional funding avenue for developers focused on the middle and premium ends of the spectrum.
Anil Bansal, Director – Urban Infrastructure, IPE Global
Additional refinance of Rs 20,000 crore from National Housing Bank will boost the current housing supply and stock, in addition to its promotion into Infrastructure sector, this in turn will lower housing interest rates resulting from increased liquidity in the banking sector, developers getting preferential and lower borrowing rates from banks, long term financing reducing the cost of construction for developers allowing them to pass the benefits to end consumers. This in turn would allow better access to institutional financing, higher limit on external borrowings, attracting investments assuring sustained growth in affordable housing arena, making it the core driving factor for our Country’s growth. As an icing to the cake, is the new credit-linked subsidy scheme for middle income group with allocation of Rs 1,000 crore in the Union Budget for 2017-18, would make a large section happy and have a “Apna Ghar”.
Pratik K. Mehta, Managing Director, Unishire
Great budget overall and indeed a full filling budget for the Real Estate sector. Finally, according infrastructure status to Affordable Housing will lower cost of finance and offer more opportunities. Carpet area definition for affordable size of homes from 60 to 90 sq.m. is apt for metros as it is more relevant and practical. Long term capital gains reduced to 2 years from 3 years is again a great and welcome move. Lowering of tax by 5% for companies with turnover below 50Cr is another good draw. All these will provide a good impetus to affordable housing and certainly pave way for government’s Housing for all by 2022 dream.
Having said that, actual impact will be felt only in a long term as most of the current development was not into the defined affordable space. Government has clearly communicated its focus on the affordable housing space and now sector will witness planning and development towards this from all the players.
On the flip-side, we would have been thrilled if our FM had extended industry status to other housing segments too that would have eased funding avenues and directly impacting the projects progress. Due to slowdown and reduced sales, developers had been under immense financial stress as only option available to them is high interest fund from PE/ NBFC’s.
Overall, a good budget that will certainly shift developer’s business focus to affordable housing. Now sector waits for RERA and GST as they will define next course of business for the sector.
Manoj Nair, CEO & Founder, RedGirraffe.com
One of the most profound effect on real estate that we saw in this budget relates to Section 23 of Income Tax Act. Individuals holding house property which is vacant throughout the year shall be subjected to tax on the properties’ deemed rental value. However all builders & developers shall enjoy a year long relief, who hold properties as stock in trade as there would be no tax on deemed rental value for a period of one year from the end of the year in which the occupation certificate was granted. While I expect an inundation of properties in the residential market thereby crashing rentals down further, this move indeed provides much needed respite, albeit for a year, for already stressed Real Estate industry.