How the Union Budget can prove positive for Indian Real Estate

This year’s Union Budget is unique on many counts. For the first time, ever, the Budget will be presented not on the last day of February but the first. Also, Rail Budget, a 92-year-old tradition, has been phased out by the government. It is also going to be a close watched budget as it comes on the backdrop of a massive currency drive which has resulted in huge deposits with banks and impacted business earnings.

Last year, the realty sector had some good news from the budget. Income tax benefits for housing, increased expenditure on infrastructure and further liberalization of REIT norms worked well in favor of Indian real estate. We have listed some expectations from the budget which can further boost Indian real estate.

1. Softening of interest rates – The year started off with a drop-in interest rate. Further rate drop would be beneficial for the sector, especially the affordable housing section.

2. A low rate of GST – Some taxes or duties like Stamp Duty have been kept out of the purview of the GST. Ideally, all taxes should be clubbed together under GST. Also, considering that housing is a basic need, it should not be charged a GST of more than 5%.

3. Greater infrastructure spending – The government expenditure on infrastructure has been huge till now. The budget should increase or at least maintain this level of spend to aid overall development.

4. Industry status for Real Estate – This has been a long-awaited demand of the real estate sector in India. Industry status would boost financing and aid in growth of the sector

5. Income tax benefits – Income Tax benefits are always closely watched. Last year we saw measures to bring relief to the salaried class.

6. Infrastructure status for low-cost housing – Affordable housing in India is the need of the hour. As the housing deficit grows, low-cost housing is the way to provide basic housing need to millions of citizens.

7. More clarity on REIT – Despite best efforts by government authorities, REITs have still not debuted in Indian markets as clarifications and announcements are being made in a piecemeal manner. Further clarity and tax freebies on REITs would be a welcome stimulus for Indian commercial real estate.

Budget is an ideal platform for the government to bring in reforms with financial prudence and planning. It would be interesting to see what the Union Budget 2017 has in store for the real estate industry.