COVER STORY - THE REAL BUDGETARY BOOST
Feb 18 2017 : The Times of India (Pune)
Kanchan Gogate
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With infrastructure status granted to affordable housing, realty industry has given a solid thumbs up to the recent Union Budget.
Experts feel easing capital gains tax norms will give the sector much-needed and deserved fillip
Experts feel easing capital gains tax norms will give the sector much-needed and deserved fillip
Post-the landmark demonetisation decision, the 2017 Union Budget was the most-awaited policy measure for the Indian economy. Like many sectors, realty sector, too, expected a budgetary boost and the Union Finance minister didn't let the industry down. The industry has termed this budget rather historical and has cheered two special mentions, industry status to lowcost housing and the easing of capital gains tax norms.It is pertinent to note that industry status had been one of the long-pending demands. The infrastructure status to affordable housing development has been complemented by raising the allocation to the rural housing programme by about 50 percent.
Key measures announced in the budget impacting housing sector include 10 million homes to be built by 2019 for the homeless and those living in kaccha houses, tax breather for notional rent income on unsold unoccupied completed projects, holding period for immovable assets reduced from three years to two years, National Housing Bank (NHB) will refinance individual housing loans of about INR200 billion (USD3 billion) in 2017-18, increase in investment in infrastructure and development projects, abolition of Foreign Investment Promotion Board (FIPB), et al.
Anuj Puri, chairman and country head, JLL India, says, “The Budget was being touted as a make-or-break one for the future of India. The government made some major announcements on the infrastructure front and also on beneficial changes to the affordable housing segment. A new Credit Linked Subsidy Scheme (CLSS) for the middle-income group with a provision of INR 1,000 crore in 2017-18 was announced. Also, extension of tenure of loans under the CLSS of Pradhan Mantri Awas Yojana (PMAY) was in creased to 20 years from the existing 15 years. Allocation to PMAY has been increased from Rs 15,000 crore to Rs 23,000 crore in the rural areas and affordable housing will now finally be given infrastructure status. This is significant, as it will provide the vital budget housing segment with cheaper sources of finance including, but not restricted to, ECBs (external commercial borrowings). Also, re-financing of housing loans by NHBs (National Housing Bank) can give a leg up to the sector.“
Anshuman Magazine, chairman, India and South East Asia, CBRE says, “Overall, the Union budget 2017 augers well for real estate, affordable housing and the infrastructure segment. The affordable housing sector is finally set to get infrastructure status. It was longawaited. While we are yet to read the fine-print, this is indeed an important step to promote access to priority lending thereby spurring supply of low cost housing units across various cities in India. Relaxation in area measurement as well as completion timelines to seek tax exemption are, welcome steps. Further, the government has also increased allocation under the PMAY scheme. This will encourage home buyers and further boost participation from the Private players. The government has also been accommodative of the concerns of the real estate sector. The relaxation on long term capital gains, joint development agreements, tax rebates for builders will help reduce their tax liability.“
Surabhi Arora, senior associate director, research, Colliers International, says, “The Union Budget promises to continue economic reforms, control inflation and prudent fiscal management. It will ensure macroeconomic stability in India against the backdrop of global protectionist policies. Post-demonetisation, surplus liquidity in the banking system has already reduced borrowing costs, which, in turn, will boost economy. The budget, however, provides little impetus in the short term to the real estate sector other than a boost to the affordable housing segment. In our opinion, the infrastructure status for affordable housing and tax relief for real estate developers are positive steps but not enough to boost residential sales in the short term. The government has provided up to INR12, 500 (USD185) income tax benefit to individuals, which is insufficient to provide the demand side push to the sector.“
Shishir Baijal, chairman and managing director, Knight Frank India, says, “This has been one of the path-breaking budgets with far reaching changes, especially, for the real estate sector. It is positive that the sector has come into the central spectrum of the budget. This has come at a time when the beleaguered sector has been looking at measures to boost the sentiments. The real estate sector which was the hardest hit by demonetisation move will be one of the major beneficiaries of this budget. Prudence in fiscal discipline is welcome and will encourage RBI to look at a lower interest rate regime that will provide the much needed fillip to this stressed sector.Increased focus on infrastructure especially construction of new roads, improvement of existing roads and coastal connectivity will go a long way to benefit the real estate sector.The move to reduce the tenure of the Long Term Capital Gain tax from three years to two years is extremely welcome and will help the marketability of real estate as an asset class.“ Anshul Jain, managing director, Cushman & Wakefield, India, says, “The thrust on affordable housing renews government's vision of 'Housing for All by 2022', giving a cheer for the housing segment. After a wait of several years, the government has finally awarded infrastructure status to a hitherto largely-neglected affordable housing. Infrastructure status will ensure easier access to institutional credit and help in reducing developers' cost of borrowing for affordable projects. According infrastructure status will further simplify approval process for affordable projects, create clear guidelines and increase transparency in the segment. Such a market, which will further be made accountable through the Real Estate Regulatory Authority (RERA), could attract debt and pension funds to invest in the affordable housing segment.“
Jain further adds, “Some of the aspects that the Union Budget missed, and those that could have created a better impact on the real estate sector include, lack of provisions for increasing the tax deduction for interest paid on housing loans, which could have been a welcomed relief and a morale booster. Further, as many from the Real estate sector had commented before the budget, some additional benefits for first time home buyers could have been included to provide the additional impetus. The Budget also did not address crucial aspects like SEZ policy or provide any further tax relief for SEZ. This is critical as globally Free Trade and low tax zones have significance in creating the right environment for economic growth.“
Key measures announced in the budget impacting housing sector include 10 million homes to be built by 2019 for the homeless and those living in kaccha houses, tax breather for notional rent income on unsold unoccupied completed projects, holding period for immovable assets reduced from three years to two years, National Housing Bank (NHB) will refinance individual housing loans of about INR200 billion (USD3 billion) in 2017-18, increase in investment in infrastructure and development projects, abolition of Foreign Investment Promotion Board (FIPB), et al.
Anuj Puri, chairman and country head, JLL India, says, “The Budget was being touted as a make-or-break one for the future of India. The government made some major announcements on the infrastructure front and also on beneficial changes to the affordable housing segment. A new Credit Linked Subsidy Scheme (CLSS) for the middle-income group with a provision of INR 1,000 crore in 2017-18 was announced. Also, extension of tenure of loans under the CLSS of Pradhan Mantri Awas Yojana (PMAY) was in creased to 20 years from the existing 15 years. Allocation to PMAY has been increased from Rs 15,000 crore to Rs 23,000 crore in the rural areas and affordable housing will now finally be given infrastructure status. This is significant, as it will provide the vital budget housing segment with cheaper sources of finance including, but not restricted to, ECBs (external commercial borrowings). Also, re-financing of housing loans by NHBs (National Housing Bank) can give a leg up to the sector.“
Anshuman Magazine, chairman, India and South East Asia, CBRE says, “Overall, the Union budget 2017 augers well for real estate, affordable housing and the infrastructure segment. The affordable housing sector is finally set to get infrastructure status. It was longawaited. While we are yet to read the fine-print, this is indeed an important step to promote access to priority lending thereby spurring supply of low cost housing units across various cities in India. Relaxation in area measurement as well as completion timelines to seek tax exemption are, welcome steps. Further, the government has also increased allocation under the PMAY scheme. This will encourage home buyers and further boost participation from the Private players. The government has also been accommodative of the concerns of the real estate sector. The relaxation on long term capital gains, joint development agreements, tax rebates for builders will help reduce their tax liability.“
Surabhi Arora, senior associate director, research, Colliers International, says, “The Union Budget promises to continue economic reforms, control inflation and prudent fiscal management. It will ensure macroeconomic stability in India against the backdrop of global protectionist policies. Post-demonetisation, surplus liquidity in the banking system has already reduced borrowing costs, which, in turn, will boost economy. The budget, however, provides little impetus in the short term to the real estate sector other than a boost to the affordable housing segment. In our opinion, the infrastructure status for affordable housing and tax relief for real estate developers are positive steps but not enough to boost residential sales in the short term. The government has provided up to INR12, 500 (USD185) income tax benefit to individuals, which is insufficient to provide the demand side push to the sector.“
Shishir Baijal, chairman and managing director, Knight Frank India, says, “This has been one of the path-breaking budgets with far reaching changes, especially, for the real estate sector. It is positive that the sector has come into the central spectrum of the budget. This has come at a time when the beleaguered sector has been looking at measures to boost the sentiments. The real estate sector which was the hardest hit by demonetisation move will be one of the major beneficiaries of this budget. Prudence in fiscal discipline is welcome and will encourage RBI to look at a lower interest rate regime that will provide the much needed fillip to this stressed sector.Increased focus on infrastructure especially construction of new roads, improvement of existing roads and coastal connectivity will go a long way to benefit the real estate sector.The move to reduce the tenure of the Long Term Capital Gain tax from three years to two years is extremely welcome and will help the marketability of real estate as an asset class.“ Anshul Jain, managing director, Cushman & Wakefield, India, says, “The thrust on affordable housing renews government's vision of 'Housing for All by 2022', giving a cheer for the housing segment. After a wait of several years, the government has finally awarded infrastructure status to a hitherto largely-neglected affordable housing. Infrastructure status will ensure easier access to institutional credit and help in reducing developers' cost of borrowing for affordable projects. According infrastructure status will further simplify approval process for affordable projects, create clear guidelines and increase transparency in the segment. Such a market, which will further be made accountable through the Real Estate Regulatory Authority (RERA), could attract debt and pension funds to invest in the affordable housing segment.“
Jain further adds, “Some of the aspects that the Union Budget missed, and those that could have created a better impact on the real estate sector include, lack of provisions for increasing the tax deduction for interest paid on housing loans, which could have been a welcomed relief and a morale booster. Further, as many from the Real estate sector had commented before the budget, some additional benefits for first time home buyers could have been included to provide the additional impetus. The Budget also did not address crucial aspects like SEZ policy or provide any further tax relief for SEZ. This is critical as globally Free Trade and low tax zones have significance in creating the right environment for economic growth.“
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