J C Sharma, vice chairman and managing director, Sobha Limited
Budget 2016: The Budget proposals have quite a few steps in favour of the real estate sector, and its growth orientation is evident from the big hike it has made in public infrastructure spending. As a result, this spending is proposed to go up by a whopping 23% from the previous year, making the case for huge economic activity in myriad sectors keeping the interest of the general public at large.
We welcome the proposals that are specific to the real estate sector in the country, such as deduction from tax on profits from a housing project for flats up to 30 square metres in the four metros and up to 60 square metres in other cities and approved between June 2016 – March 2019 provided they are completed in three years. This proposal we believe will encourage supply in the affordable housing segment though subject to Minimum Alternate Tax.
Another welcome step is the proposal that distribution made out of income of SPV to the Real estate investment trusts (REITs) and Infrastructure Investment Trusts (INvITs) having specified shareholding will not be subjected to Dividend Distribution Tax (DDT), in respect of dividend distributed after the specified date. This is a progressive step and one that is likely to promote the novel concept of REITs and also attract fresh investments into the sector.
A third proposal we welcome is the deduction for additional interest of Rs. 50,000 per annum for loans up to Rs. 35 lakh sanctioned in 2016-17 to first time home buyers, where the cost of the house itself does not exceed Rs. 50 lakh. This is directly beneficial for both buyers and sellers and will perk up the market sentiments.
The exemption from service tax on construction of affordable houses up to 60 square metres under any scheme of the Central or State Government including public private partnership (PPP) schemes is another step in the right direction.
Furthermore, the decision to offer exemption for rent paid has been increased from Rs. 24,000 to Rs. 60,000 which will augur well for the rental segment of the housing sector. It also takes into account the reality of rising rentals owing to the pressure of demand for quality housing, a phenomenon that can be witnessed across cities and town in the country.
Also, the excise duty exemption presently available to concrete mix manufactured at the site for use in construction work to the ready-mix concrete is a welcome move for the industry.
Last but not the least, is the budget proposal to digitize land records. A much awaited step in the right direction which will render land records free from encumbrances. We believe that all these steps taken together will help give the much needed fillip to the housing sector and strengthen our economy.