Union Budget 2016-17: Mixed Reaction From Experts
04 Apr 2016
The Union Budget of India 2016-17 has brought many positives for the real estate sector. It will encourage affordable home buyers to invest in property, lead to greater inflow of capital in the real estate sector and will have a constructive impact on employment outlook and business optimism. However, real estate experts feel that while many long term gains of the housing market have been addressed, the short term pains were not accounted for. Here are a few opinions from the experts:
J C Sharma, VC & MD of Sobha Limited says that in the present economic condition, the budget has brought many benefits for the housing sector. The 100% deduction for profits on construction of housing projects up to 30 sq.m. in four metros and 60 sq.m. in other cities approved during June 2016 to March 2019 and completed in three years, will boost demand in the affordable housing segment. Distribution made out of income of SPV to the Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts will promote REIT and spur new investments.
Rajeev Talwar, CO-CEO of DLF provides a balanced viewpoint, stating that the budget has given relief to the affordable housing segment by giving a 100 percent exemption on profits. However, relief for the repayment of interest and principal should have been given to all categories of housing instead of only affordable housing to increase demand from all segments.
Anshuman Magazine, CMD, CBRE of South Asia, believes that the most positive aspect has been the exemption of REITs from Direct Distribution Tax, which will drive companies to set up REITs, thereby changing the face of the industry. Corporate real estate will also benefit from the announcement of exemption of fiscal incentives to special economic zones (SEZs). The CMD states that though more could have been done to boost housing demand in India, the Government has extended incentives on various fronts, mainly the Affordable Housing segment.
Abhishek Lodha, the Managing Director of Lodha Group believes that focus on affordable housing will lead to a greater number of affordable housing projects in India, thus going in line with the government's vision of 'Housing For All'.
On the other hand, the CMD also goes further to state that the service tax hike will burden the homebuyers, especially middle class homebuyers. Due to no change in the personal income tax exemption slab, women homebuyers will not gain anything. Additionally, the budget is not promising for job generation and there is no opportunity for earning disposable income for urban middle class. There is also no provision to lower input cost of developers. Surcharge of 15 percent over income of Rs.1 Crore would discourage luxury housing sector.
Rattan Hawelia, chairman of Hawelia Group, says that the exemption of home loan interest for first time homebuyers will benefit the affordable housing sector, but that is not enough to drive the housing demand. Reduction of dividend distribution tax on REITs would certainly benefit the already stressed real estate sector.
Like the others, David Walker, managing director of SARE Homes, also believes that the budget brings a handful of positives as well as negatives to the real estate sector. He said that the 3.5 percent fiscal target would reduce interest rates and benefit all sectors of the economy, mainly the housing segment. He also said that excise duty exemption on ready-mix concrete used in construction sites indicates positivity for the construction industry.
However, he feels that some of the concerns in the housing market were not addressed. The real estate sector's expectations of being accorded Industry and Infrastructure status have not been accepted. Also, there was no mention about action being taken to expedite GST and the Real Estate Development Bill.