Budget 2016 has come up with lucrative measures to boost the sluggish real estate industry. The industry players have much to cheer about from the union budget. The ‘Housing for All by 2022’ scheme lays out the plan for building additional 100 million homes by 2022. 90 percent of the demand is in affordable housing segment. So, the main thrust has been laid on this segment to perk up the market sentiments.
Two of the major proposals pertaining to property market in this year’s budget are:
1. Additional Rs 50,000 deduction on interest on loans for the first time buyers, when the loan sanctioned is less than 25 lakh and the property value doesn’t exceed Rs 50 lakh.
2. 100 percent deduction on the profit generated through affordable housing development projects.
Besides above, there is a proposed exemption of dividend distribution tax (DDT) on the Real Estate Investment Trusts (REITs). Distribution made out of income of SPV (special purpose vehicles) having specified shareholding to the REITs and InvITs will be exempted from DDT. Service tax on construction of affordable houses and excise duty on manufacture of concrete have also been relaxed. To bring out clarity in land titles, a proposed outlay of 150 cr has been set aside for digitising land records.
To save interest of home buyers, bills in the following respect are in line to be passed:
a. All projects, residential and commercial, that cover an area of 500 square meters or more or encompass 8 flats or more, will have to be registered with the Real Estate Regulator. No project will be passed unless it has all requisite permissions from local authorities to begin construction.
b. Developers will have to clearly mention the complete carpet area to the prospective buyers, and not just the area excluding kitchen and bathroom/s.
c. Developers are restricted from transferring funds received from buyers of a particular project into other projects. It will be mandatory for the real estate developers to keep 70 percent of the funds received in an escrow account for that particular project.
d. Misleading advertisements showing false pictures of the projects will be counted as a punishable crime.
These encouraging initiatives will not only have a fair opportunity for buyers to get their dream home, but also a positive impact on the consumption of cement and steel. The low and mid-income households are more likely to be benefited with an upsurge in affordable housing projects, and even the individuals who opt for rental homes. The buying propensity of middle class and upper middle class will enhance due to tax exemption on availing home loans. This will reduce the burden on first-time buyers in tier-II and tier-III cities, as the tax deduction limit has been enhanced from Rs 2,00,000 to 2,50,000.
Overall, these are reassuring measures in the right direction that can boost consumer confidence and trigger growth in the segment.
