Decoding Union Budget 2017-18 Impact on Real Estate
FICCI organized an interactive session on 'Decoding Union Budget 2017-18 - Impact on Real Estate' on February 9, 2017 in New Delhi jointly with PwC, the technical knowledge partner for this interactive session. The purpose of the interactive session was to discuss the impact of Union Budget (2017-18) on real estate sector with a focus on understanding viewpoints from each stakeholder including developer, banks, law firms, private equity, consultants and IPCs.
Rajiv Ranjan Mishra, Joint Secretary, Ministry of Housing and Urban Poverty Alleviation, Government of India, delivered the keynote address and chaired the panel discussion on 'Union Budget: Impact Analysis on Real Estate'. He brought to light some interesting facts about the future of Indian real estate sector and said that the government was drafting a National Urban and Habitat Policy, National Rental Housing Policy and Model Tenancy Act for efficient functioning of the real estate sector and imparting transparency in its working.
Mishra said that budget was critical to the real estate sector as it addressed many of the industry's issues by way of policy and legislative interventions. He said that the government has extended the benefits of affordable housing schemes to middle income groups as well and was now encouraging developers to enter the affordable housing segment by way of granting infrastructure status to it.
Dr. A. Didar Singh, Secretary General, FICCI, said that the government has taken many constructive steps towards making the system transparent and easier to comply with which has resulted in efficient governance. The budget has implications on various sectors and it was another step towards the reforms agenda of the government. He assured that FICCI would continue to support the initiatives of the government.
The following are the major concerns raised by the industry during the interactive session: 1. Announcement of affordable housing as infrastructure status is a welcome move, however industry seeks, 'industry status' for the entire real estate sector, which will help to achieve quicker & easier financing for real estate projects and give developers an alternate source of funding. 2. Issue regarding unsold inventory is a major concern faced by the industry, as real estate developer the entire cash-flow of the project stuck and developer is unable to complete its projects, therefore the Government needs to create an escrow mechanism for the same like separate small fund to resolve the problem. 3. Issues under Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (LARR): a. Local self-governments should be recognised as "appropriate governments" in matters of land acquisition. b. The compensation for the acquired land is based on the value of the agricultural land; however price increases have been ignored, which should be taken into consideration. 4. In the current union budget announcement, for affordable housing, instead of built up area of 30 and 60 square metre, the carpet area of 30 and 60 square metre will be counted. Also the 30 square metre limit will apply only in case of municipal limits of 4 metropolitan cities while for the rest of the country including in the peripheral areas of metros, limit of 60 square metre will apply, but a fine print is required for the same where it clarifies aspects like; implications of the rule when a property is falling in both metro & non-metro area. 5. Interest subvention for housing loans over ` 50 lakhs and above should be given; which will boost the mid-housing segment population living in the metro cities of India. 6. Further relaxation is required in Section 194-IA - TDS on transfer of immovable properties (other than agricultural land) 7. The union budget indicates the tax arbitrage available to individuals via setting off loss from second home has now been limited to ` 2 lakh. The provision may discourage investment in second property to save tax. It is indeed laudable that second-time home buyers have been
L to R: Dr. A. Didar Singh, Secretary General, FICCI; Navin M. Raheja, Chairman, FICCI Real Estate Committee and Chairman & Managing Director, Raheja Developers Ltd.; Ashutosh Chaturvedi, Partner, Tax and Regulatory, PwC India; Mousumi Roy, Senior Director & Head, Smart Cities, Urban Infrastructure, Real Estate, FICCI and Rajiv Ranjan Mishra, Joint Secretary, Ministry of Housing and Urban Poverty Alleviation, Government of India.