Union Budget 2016: Mixed response to Arun Jaitley’s budget moves on housing

By: | Updated: February 29, 2016 7:34 PM

Union Budget 2016: Prime Minister Narendra Modi's pet project 'Affordable housing for all' remained the key focus of Finance Minister Arun Jaitley's Union Budget speech in Parliament.

union budget 2016 - housingUnion Budget 2016: Prime Minister Narendra Modi’s pet project ‘Affordable housing for all’ remained the key focus of Finance Minister Arun Jaitley’s Union Budget speech in Parliament.

Prime Minister Narendra Modi’s pet project ‘Affordable housing for all’ remained the key focus of Finance Minister Arun Jaitley’s Union Budget speech in Parliament on Monday. The announcements received a mixed response from the real estate developers.

“The FM presented a very finely balanced budget. So far, as the housing sector is concerned, the Union Budget for the FY 16-17 is in line with Prime Minister’s vision of ‘Housing for all’ by 2022. Tax reforms made by the government are indicative of centre’s seriousness towards giving a much required fillip to the housing sector,” Sanjaya Gupta, MD, PNB Housing Finance Limited said.

For the Housing sector Finance Minister Arun Jaitley made three major announcements that may boost the realty sector: proposed an additional Rs 50,000 deduction on interest on loans for first home buyers and tax incentives on development of affordable housing, exempted REITs from dividend distribution tax, which was a long pending demand from realty players.

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The Finance Minister announced an additional tax relief of Rs 50,000 per annum on a loan of Rs 35 lakh in 2016-17 for the first-time home buyers, provided the house cost does not exceed Rs 50 lakh. Also, Jaitley has increased the tax deduction limit to Rs 60,000 per annum from the current Rs 24,000 on the housing rent.

Although the real estate players say this move will boost home-buying sentiments, however, this deduction is not sufficient to increase the sentiment much for first-time home buyers in the central parts of the metros.

“Budget 2016-17 was far below expectations. Some leeway has been given to first-time home loan borrowers, but the relief will not boost demand in the metros,” Arvind Jain, managing director, Pride Group said.

Jaitley’s also announced to exempt Real Estate Investment Trusts(REITs) from Dividend Distribution Tax (DDT). Welcoming the move, realty developers said this will ensure positive movement on real estate projects and will help in bringing the sector on a sustained growth path.

“While the Union budget did not address the issues of Stamp Duty and Capital gains, the exemption of Dividend Distribution Tax (DDT) for Special Purpose Vehicle (SPV) of REITS in the Union Budget is a welcome move. Till now DDT was applicable on SPVs, which was a huge hindrance in the introduction of REITs investments, making them less attractive. This move is likely to please the institutional investors who view India as an untapped market for this asset. REITs have a huge opportunity for developers and investors in India given the potential in the Indian real estate market. However, abolishment of DDT alone may not be sufficient enough for companies to launch REITs in the coming months, ” Sanjay Dutt, Managing Director, India, Cushman & Wakefield said.

To boost supply of affordable homes, he proposed 100 per cent deduction for profits to an undertaking from a housing project for flats up to 30 sq metres in four metros and 60 sq metres in other cities. Experts feel this distribution should have been equitable, and the three-year window for project completion could have been for a longer duration as approvals and construction typically take a long time.

Video | Union Budget2016: Editors First Take on Arun Jaitley’s Announcements

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