Budget 2016-2017 to encourage rental housing

The Union Budget for 2016-17, presented by finance minister earlier this week seeks to boost the rental housing market by increasing the House Rent Allowance (HRA) deductions. Those not owning a house and not receiving any HRA from their employers can now avail a standard deduction of Rs 24,000; while for those availing HRA, the limit has been raised to Rs 60,000 per annum towards rent paid for their accommodation.

 The budget has also attempted to encourage private sector investments into the Indian realty sector, while aiming to introduce banking reforms. The most encouraging announcement, however, has been the exemption of Real Estate Investment Trusts (REITs) from Direct Distribution Tax (DDT). It is hoped that having cleared this hurdle, companies will now come forward to set up REITs, which is expected to be a game changer for the industry in India.

The corporate real estate space will also benefit from the announcement made by the Finance Minister on the sunset clause for Special Economic Zones (SEZs). According to the Budget 2016-17, the sunset date for exemption of fiscal incentives to SEZs has now been pushed forward to March 2020.

Although more could have been done to revive housing demand in the country, the government has extended incentives on various fronts, especially for the affordable housing segment. It has announced 100% tax exemptions for private players constructing affordable housing of 30 sq m in the four metros and 60 sq m in other cities, approved during the June 2016 to March 2019 period, and completed within three years of construction approval.

The finance minister has also announced 100% excise duty exemption for ready mix concrete, which is expected to bring down environmental pollution at construction sites. An additional rebate of Rs 50,000 per annum on housing loan interest for first time home buyers in the affordable segment for loans not exceeding Rs 35 lakh, and for properties not exceeding Rs 50 lakh, was also announced. This move is likely to fuel affordable housing demand, especially in the tier II and III cities of the country.

The infrastructure sector was particularly in focus in the recent budget announcements, with a record allocation of

for overall infrastructure development, including railways.There was also increased focus on greenfield ports as well as on the upgradation of underutilized / unused airports and airstrips. In addition, various schemes were announced by the finance minister to rejuvenate private sector interest in infrastructure investments, through public–private partnership (PPP) models. The ease of doing business was in focus too. Changes in the Companies Act, and early registration of new companies and start-ups are expected to facilitate the business environment in the country.

The author is chairman and managing director, CBRE South Asia Pvt Ltd

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s