Union Budget 2017 – Impact on Real Estate Sector

The much-awaited budget 2017-18 is out and along with it, an array of expectations for the future. The Union Budget 2017 is a very encouraging and favorable budget for real estate industry. The declaration of affordable housing as ‘infrastructure’, the accelerated aim of more rural housing and the boost to infrastructure are some propositions with a direct impact on the real estate sector. Here are some of the key points pertaining to the real estate sector and their impact:

Budget Impact on Affordable Housing, Zee Business with Mr. Vishal Gupta, MD – Ashiana Housing

Increase in the size of affordable housing

The qualifying size for affordable housing has also now changed, from a built-up area to a carpet area of 30 sq metres and 60 sq meter.  The 30-sq-metre limit will apply only in the case of municipal limits of four metropolitan cities while for the rest of the country, including in the peripheral areas of metros, limit of 60 sq metre will apply. The profit-linked income tax exemption for promoters of affordable housing schemes is also extended. In order to be eligible, the scheme was to be completed in three years after commencement which has now been extended to five years.

Infrastructure status

The Affordable Housing sector has been granted the Infrastructure Status which has been a long time demand from the industry. Granting infrastructure status to affordable housing will provide a boost in the volume of construction activity across the country. Infrastructure status will enable developers operating in this segment to raise loans at a cheaper rate, akin to other infrastructure projects. This low cost of funding would finally help the first-time home buyers, who would get home at more affordable rates.

PMAY get huge boost

The Government has allocated Rs 23,000 crore for the Pradhan Mantri Awas Yojna (PMAY) to propose to accomplish one crore houses by 2019 for those living in kachha houses.

Reduction in holding period

The holding period for capital gains on the sale of immovable property—land and building—to qualify as long-term capital gains (LTCG) is proposed to be reduced to 2 years from 3 years in the Union Budget 2017. These steps are expected to reduce the capital gains tax burden on property sellers and thereby make the movement of immovable capital easier. Investors who were holding on to properties will benefit from this reduction in tenure.

Tips On Bricks #10 – Why Real Estate is Long Term Investment – Mr. Varun Gupta (Director – Ashiana)

Capital gains on Joint Development Agreements

For the development of properties through Joint Development Agreements, the liability to pay capital gains tax will be in the  year after the project is completed. This is likely to reduce the disputes in joint development projects. Changes in the taxation aspect of JDAs will greatly encourage more landowners to partner with developers. This will benefit the real estate developers and in turn, is likely to benefit the end consumers.

Reduction in tax rate

The Finance Minister reduced the income tax rate from 10% to 5% for the slab of Rs 2.50 lakhs to Rs 5 lakhs. This will mean tax savings for many individuals. Savings in tax coupled with the lower interest rates will make buying homes more affordable for the consumers and this can help in further improving the sales in the housing sector.

Loan refinance

National Housing Bank will refinance individual loans worth Rs 20,000 crore in 2017-18. This will give a major push to affordable housing companies.

Overall, the budget has brought some good news for the consumers, who were looking forward to buy homes at affordable rates and for affordable housing sector as well.

Category: Real Estate,

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About The Author

Ashiana, Ashiana Housing build homes. Homes surrounded by vast green spaces and fresh breeze. Homes cocooned in secured gated complexes. Homes where futures are forged and there are opportunities to grow. And Homes in environments brimming with healthy activity, trust and respect. At heart, we build communities with care.

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