Budget 2017-18: relief for notional rental income
In the Union Budget 2017-18 announced earlier this month, the finance minister announced the government’s agenda to transform, energise and clean India.
Combined with the various policy initiatives announced last year, this year’s budget announcements are expected to help ease supply and also address the demand issues impacting the affordable housing sector in India. Regarding the taxation measures announced in the budget, most measures have been taken with the view to ease, and subsequently spur transaction activity in the real estate sector.
The sector cheered the announcement of according infrastructure status to affordable housing, a long pending
request by the industry. This is an important step towards promoting access to priority lending thereby, spurring supply of low-cost housing units across various cities in India. Relaxation in area measurement as well as completion timelines to seek tax exemption were also welcomed. Change built-up area to car
pet area: It is likely to increase the livable area, thereby attracting end-users. With regards to supply, the increase in the area of the units will make it financially viable for developers to participate in the segment.
With the affordable housing segment being accorded infrastructure status, developers will now be able to gain access to lower cost credit for longer tenures, which should improve the cash-flows of their projects. One year relief for notional rental income for unsold
housing units: Earlier, developers had to pay income tax on unsold inventory in residential developments. In a bid to ease the pressures on developers in view of the piling unsold inventory levels, the government has decided to make amendments to this section of the Income Tax Act. Under the amended section, the notional income shall be considered as nil for apartments completed but not sold during the financial year, in which the completion certificate has been obtained. The time period for calculation of notional rental on unsold apartments will now be one year after completion. This comes as a relief for developers who have been provided some leeway to off-load their inventory. The author is chairman – India & South East Asia CBRE South Asia Pvt Ltd