BENEFITS beckoning realty
Feb 18 2017 : The Times of India (Pune)
Small amendments in the Income Tax Act spread across the Budget have ensured benefits to all stakeholders
A close reading of the Union Budget 2017 tells us that, housing, especially affordable housing, was the only industry that found mention in the Union finance minister's speech. It was a pleasant surprise to find that small amendments in the Income Tax Act spread across the Budget have given benefits to all stakeholders; home buyers in urban and rural areas, investors, landowners, owners of redevelopment properties, banks, real estate funds and of course, developers.Many experts in the field believe that this is the beginning of more such incentives for this crucial sector, which is India's second highest employer and could stimulate over 140 industries once it starts growing.
Following are the various benefits that the Union Budget is set to bring in trail.
INDUSTRY:
Infrastructure status to affordable housing will change perception of the industry in the eyes of all stakeholders such as buyers, media, banks, foreign investors, and government departments Developers will be able to get funding at cheaper rates, over a longer period and at better terms from the banking system
BUYERS: MIDDLE-CLASS
Reduction in the income tax rate will benefit middle-class buyers and improve their home loan eligibility Further reduction in housing loan interest rates due to various factors such as demonetisation is expected to continue in 2017-18 Buyers can get income tax deduction of interest even if the house is completed within five years from end of year in which housing loan is taken
BUYERS: MIG LIG
Increase in amount of loan eligible for subsidy under Housing for All Scheme to Rs nine lakh and Rs 12 lakh (already announced by Prime Minister in his address to nation on December 31, 2016) Bill relating to curtail the menace of illicit deposit schemes is set to be introduced. It would curb illegal chit fund 'bhishi' schemes and can be a good opportunity for developers to encourage these people to invest in affordable housing ?
BUYERS: TOWNS & RURAL AREAS
Target of building one crore homes in rural Areas by 2019 Budget Allocation for Pradhan Mantri Awas Yojana (Rural) increased by a massive 50 per cent from Rs 15,000 crore in 2016-17 to Rs 23,000 crore in 2017-18 Allocation for rural and agriculture sector increased by 24 per cent to Rs 1.87 lakh crores with focus on three areas Building infrastructure Providing employment & business opportunities Improve living conditions
FOREIGN INVESTORS:
The Foreign Investment Promotion Board (FIPB) to be abolished in 2017 18 as over 90 per cent sectors are under the automatic route Liberalisation of foreign direct investment (FDI) policy is expected to give a huge boost to foreign investors. It will encourage not just the large funds but many small and mid-level funds to start investing in India. This will bring the much-needed liquidity in the market and bring down cost of funding.
DEVELOPERS
Conditions for getting income tax deductions for affordable housing projects eased with effect from April 1, 2018 Definition of maximum area of unit of 30 sq mtrs (Metros) and 60 sq mtrs (Non-metros) changed from built-up area to carpet area (as per RERA).
Limit for 30 sq mtr will apply only to municipal limits of four metros (Del hi, Mumbai, Chennai, and Kolkata)
Time for completion of project increased from three to five years Corporate income tax for com panies having turnover up to Rs 50 crore cut to 25 per cent Time limit for getting credit for the minimum alternate tax (MAT) for the corporates and the alternate minimum tax (AMT) for the non-corporates increased from 10 years to 15 years. This will beneficial companies, which are claiming deduction under Sec 80IBA as above since they will be actual ly able to use the credit if they do another project in the same company later Developers will not have to pay tax on notional rental income from the inventory they are holding as stock for a period of one year from end of the financial year in which fullpart completion certificate is obtained
INVESTORS
Holding period for profit on immovable property to be treated as long-term capital gains re duced from three years to two years Presently, a tax payer can only invest in bonds of National Highways Authority of India or Rural Electrification Corporation to save the capital gains tax. The Budget has proposed that tax payers will now be able to invest in any bond with a maturity period of more than three years notified by the government. This will create more options for Investors and improve their confidence, as they will have more options to invest after selling their immoveable property However the restriction of deduction on interest paid on housing loans taken for second home to Rs two lakh is a dampener on buying premium properties.
LANDOWNERS & OWNERS OF REDEVELOPMENT PROPERTIES
If landowners want to give land on joint development agreements, they will have to pay tax only when the project gets part or full completion Change of base year from 1981 to 2001 for indexation purpose will make it easier for landowners to sell their land due to savings in capital gains tax These benefits can enable a developer to get better terms from landowner for both sale and joint development No tax deduction at source (TDS) for any award or agreement made which has been exempted from the Income Tax under section 96 (except those made under section 46) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, (RFCTLARR Act)
BANKING SECTOR
Lending to affordable housing will now be under the priority sector Banks should get flexibility in structuring loans especially for mid and large township projects Foreign investors & funds Foreign Investment Promotion Board (FIPB) to be shut down in the next financial year. This will increase ease of doing business and encourage more investors to look at India seriously Taxation of foreign investors and funds simplified, which will make India an attractive destination for private equity fund managers
CITY URBAN DEVELOPMENT
New metro rail policy and new metro rail act to be announced with focus on innovative models of implementation and financing and encourage private participation. Unmanned Rail crossings to be eliminated by 2020.
Select airports in Tier-II cities to be taken up for operations and maintenance under PPP mode 2,000 kms of coastal connectivity roads identified for development 25 railway stations to be award ed for redevelopment in 2017-18
Vinit Vyankatesh Deo (The writer is a chartered account and real estate consultant)
Following are the various benefits that the Union Budget is set to bring in trail.
INDUSTRY:
Infrastructure status to affordable housing will change perception of the industry in the eyes of all stakeholders such as buyers, media, banks, foreign investors, and government departments Developers will be able to get funding at cheaper rates, over a longer period and at better terms from the banking system
BUYERS: MIDDLE-CLASS
Reduction in the income tax rate will benefit middle-class buyers and improve their home loan eligibility Further reduction in housing loan interest rates due to various factors such as demonetisation is expected to continue in 2017-18 Buyers can get income tax deduction of interest even if the house is completed within five years from end of year in which housing loan is taken
BUYERS: MIG LIG
Increase in amount of loan eligible for subsidy under Housing for All Scheme to Rs nine lakh and Rs 12 lakh (already announced by Prime Minister in his address to nation on December 31, 2016) Bill relating to curtail the menace of illicit deposit schemes is set to be introduced. It would curb illegal chit fund 'bhishi' schemes and can be a good opportunity for developers to encourage these people to invest in affordable housing ?
BUYERS: TOWNS & RURAL AREAS
Target of building one crore homes in rural Areas by 2019 Budget Allocation for Pradhan Mantri Awas Yojana (Rural) increased by a massive 50 per cent from Rs 15,000 crore in 2016-17 to Rs 23,000 crore in 2017-18 Allocation for rural and agriculture sector increased by 24 per cent to Rs 1.87 lakh crores with focus on three areas Building infrastructure Providing employment & business opportunities Improve living conditions
FOREIGN INVESTORS:
The Foreign Investment Promotion Board (FIPB) to be abolished in 2017 18 as over 90 per cent sectors are under the automatic route Liberalisation of foreign direct investment (FDI) policy is expected to give a huge boost to foreign investors. It will encourage not just the large funds but many small and mid-level funds to start investing in India. This will bring the much-needed liquidity in the market and bring down cost of funding.
DEVELOPERS
Conditions for getting income tax deductions for affordable housing projects eased with effect from April 1, 2018 Definition of maximum area of unit of 30 sq mtrs (Metros) and 60 sq mtrs (Non-metros) changed from built-up area to carpet area (as per RERA).
Limit for 30 sq mtr will apply only to municipal limits of four metros (Del hi, Mumbai, Chennai, and Kolkata)
Time for completion of project increased from three to five years Corporate income tax for com panies having turnover up to Rs 50 crore cut to 25 per cent Time limit for getting credit for the minimum alternate tax (MAT) for the corporates and the alternate minimum tax (AMT) for the non-corporates increased from 10 years to 15 years. This will beneficial companies, which are claiming deduction under Sec 80IBA as above since they will be actual ly able to use the credit if they do another project in the same company later Developers will not have to pay tax on notional rental income from the inventory they are holding as stock for a period of one year from end of the financial year in which fullpart completion certificate is obtained
INVESTORS
Holding period for profit on immovable property to be treated as long-term capital gains re duced from three years to two years Presently, a tax payer can only invest in bonds of National Highways Authority of India or Rural Electrification Corporation to save the capital gains tax. The Budget has proposed that tax payers will now be able to invest in any bond with a maturity period of more than three years notified by the government. This will create more options for Investors and improve their confidence, as they will have more options to invest after selling their immoveable property However the restriction of deduction on interest paid on housing loans taken for second home to Rs two lakh is a dampener on buying premium properties.
LANDOWNERS & OWNERS OF REDEVELOPMENT PROPERTIES
If landowners want to give land on joint development agreements, they will have to pay tax only when the project gets part or full completion Change of base year from 1981 to 2001 for indexation purpose will make it easier for landowners to sell their land due to savings in capital gains tax These benefits can enable a developer to get better terms from landowner for both sale and joint development No tax deduction at source (TDS) for any award or agreement made which has been exempted from the Income Tax under section 96 (except those made under section 46) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, (RFCTLARR Act)
BANKING SECTOR
Lending to affordable housing will now be under the priority sector Banks should get flexibility in structuring loans especially for mid and large township projects Foreign investors & funds Foreign Investment Promotion Board (FIPB) to be shut down in the next financial year. This will increase ease of doing business and encourage more investors to look at India seriously Taxation of foreign investors and funds simplified, which will make India an attractive destination for private equity fund managers
CITY URBAN DEVELOPMENT
New metro rail policy and new metro rail act to be announced with focus on innovative models of implementation and financing and encourage private participation. Unmanned Rail crossings to be eliminated by 2020.
Select airports in Tier-II cities to be taken up for operations and maintenance under PPP mode 2,000 kms of coastal connectivity roads identified for development 25 railway stations to be award ed for redevelopment in 2017-18
Vinit Vyankatesh Deo (The writer is a chartered account and real estate consultant)
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