The Union Budget 2014-15 was
presented in parliament under economic circumstances requiring tax revenues to
keep pace with targets. Mr. Arun Jaitley has given a fresh lease
of life to the cash-strapped real estate sector and announced that Real Estate Investment Trusts (REITs) would soon be allowed.
REITs, which are a fairly successful
concept internationally, would get a tax pass-through status. Infrastructure
Investment Trusts would get tax benefits as well.
Below are 5 key
points from this Budget that’ll shape the industry in the years to come –
1):
Introduction of Real estate Investment Trusts (REITs)
Ø REITS
Define as an investment instrument in the Indian
Market and the finance minister has promised tax pass-through status for the
same. REITs can be traded like shares in a share market.
How will this Impact the real estate Sector?
The Tax through
status for REITs will attract more investments into this sector especially
since it removes double taxation. This would allow investors to plan their
taxes in better way. For example, capital gains on REITs can be written off
against capital losses incurred elsewhere. Builders can use REITs to fund and
operate commercial offices and this move would enable small investors to invest
in commercial real estate, in smaller chunks.
2):
FDI in Real estate
What
has been accomplished?
Previously, FDI was
permitted only in real estate projects which had a lowest proposed developed
area of 50,000 sq. mts. and a capitalization of $10 million. This has now been
reduced to 20,000 sq. mts. and $million.
How will this Impact the real estate Sector?
This will increase
liquidity and make raising capital for projects simpler for B and C category
developers, builders, especially in Level 2 and 3 places. Because of this
shift, we can anticipate more affordable houses in the market in Future.
Developers or Builders who allocate a third of their
projects to low cost homes are exempted from these rules.
3):
Tax deductions on home loan repayment
What
has been accomplished?
The tax relaxation available for home loan interest pay
back has been increased to Rs.2 Lakhs from Rs. 1.5 Lakhs and the limit under
80c (which contains home loan principal repayment) has been increased to Rs.1.5
Lakhs from Rs. 1 Lakh.
How will this Impact the real estate Sector?
This helps consumers save more by investing in real
estate. The move will enhance the residential
real estate
market which has
seen a downturn recently.
4): Affordable housing
What
has been accomplished?
Rs. 4000 Cr. has
been allocated for affordable housing via the National Housing Board
How will this Impact the real estate Sector?
This is in line
with the Governments vision of providing housing for everyone in the country by
2022. This move will help provide housing to lower middle class and
economically weaker section of society.
5): Development
of Smart Cities
Ø The Government is aiming at providing global -
standard cities and improving the overall infrastructure by constructing roads
and other facilities. This will provide a more option for NRI’s to look beyond
the cities and invest in locations nearer their home towns or quieter suburbs
and satellite towns.
What
has been accomplished?
Rs. 7060 Cr. Has
been allocated towards development of smart cities.
How will this Impact the real estate Sector?
Development of 100
smart cities was part of the BJP’s manifesto. Urban Development minister
Mr.Venkaiah Naidu had a meeting with ministers of various states about the same
on 2nd June, 2014. These will be planned cities across the country
with GIS based town planning, integrated drainage systems and advanced transportation
facilities. These new satellite cities would help the real estate sector in
terms of employment through construction and betterment of infrastructure and
providing affordable housing.
Author:
B.U.Bhandari
Landmarks leading real estate developers in Pune and their upcoming construction projects in Pune are residential project -
Unity Park in Kondwa and Alacrity in Baner, Commercial Project in Kharadi &
Belleza NA bungalow plots.
