From ET Realty
We in the real estate sector tend to seek immediate benefits, hoping for revival of demand through reduction in home loan rates or service tax exemption on under-construction houses or tax relief for first time home buyers. These measures by themselves play a miniscule part in resurrecting the industry. What we need is a major boost that will only come from an upturn in the economy. We need an environment in which jobs are created, newer businesses are established, and there is more predictability in this sector leading to a flow of investments. In the shadows of an uncertain global economy, the finance minister has proposed a budget that seeks to set in place the foundations for a robust economy in the longer term.
In the past the government has made numerous announcements, however this time the budget looks to set in motion delivery of those lofty policy statements. The key focus is on spending on agriculture, social sectors and allocating massive investment on road, port, airport and utility infrastructure; while at the same time being financially prudent in not increasing fiscal deficit targets. Jobs are sought to be created by encouraging industries to be set up under the ‘Make in India’ scheme and providing tax relief to MSME and Start Ups. Resources for business will be created through skill development and setting up institutes for higher education. Capitalization of banks and relaxation of FDI norms will ensure more capital flow. Last but not the least; the government also intends to improve ease of doing business, a long standing demand especially of the real estate industry. In the long run, all these will boost demand for offices, residences, retail, hotels and industrial real estate.
Specific to the real estate sector, the Finance Minister’s announcement of removal of Dividend Distribution Tax (DDT) for REITs will usher in the REITs and InvITs allowing investment participation from the retail and institutional investor. The InvIT and the adoption of a dispute resolution mechanism for PPP projects will provide a massive boost to the infrastructure sector. “Housing for All” received an impetus with the announcement of tax breaks for affordable housing projects, tax relief for those not getting HRAs on rentals up to INR 60,000 per annum and additional tax break of INR 50,000 for first time home buyers. This along with the spew of proposals under the ‘Housing for All’ scheme should further increase the supply of affordable home. A couple of announcements seemed to be made in the passing, but are extremely crucial to this sector. These are the intent to digitize land records, and setting up of a government committee to look into strategic sale of government assets like land and manufacturing units.
Overall the budget provides the long term guidance in bringing the economy back on track. However, there is only so much that can be covered in the budget and we in the industry hope for more announcements such as removal of MAT in SEZs, implementation of the Real Estate Regulator Bill, single window clearance and implementation of GST.
The key to the budget lies in the implementation the proposed policies. A year down the line we should evaluate the government’s performance based on the execution of what it has set out to do.