In­fra­struc­ture, com­mer­cial realty to ben­e­fit from bud­get

HT Estates - - HTESTATES - - Anuj Puri,

it may get re­alised in next 2-3 years. Al­ready, few large de­vel­op­ers have an­nounced plans to exit from their com­mer­cial as­sets through REITs.

For retail in­vestors, REITs will open up an ad­di­tional in­vest­ment plat­for m. They would mostly help in­di­vid­u­als look­ing for a safe an­nu­ity in­vest­ment prod­uct. Gen­er­ally, com­mer­cial prop­er­ties gen­er­ate a yield in the range of 8% to 10%, ex­clud­ing any cap­i­tal gain or loss. Such in­vest­ment prod­uct was out of the reach of most in­di­vid­ual in­vestors due to high ticket price and as­so­ci­ated risk of com­mer­cial prop­er­ties.

REITs are also ef­fi­cient from tax­a­tion per­spec­tive, com­pared to di­rect own­er­ship. The ten­ure for clas­si­fy­ing cap­i­tal gains as long term in case of REITs is just one year, while in di­rect own­er­ship, i t i s t wo years ( re­cently re­duced from three years). In our view, in­di­vid­ual in­vestors may con­sider in­clud­ing REITs in their in­vest­ment port­fo­lio keep­ing in view of own in­vest­ment ob­jec­tives and their need for di­ver­si­fi­ca­tion and risk po­si­tions.

The au­thor is part­ner and head of real es­tate and con­struc­tion sec­tor, KPMG in In­dia

Ap­prox­i­mately 16-18 km of road con­struc­tion per day has been achieved by the middle of the cur­rent fi­nan­cial year, and bud­get 2016 has adopted mea­sures to sig­nif­i­cantly step up Na­tional High­way Au­thor­ity of In­dia’s ca­pa­bil­i­ties in this re­gard. Roads in­fra­struc­ture has great in­flu­ence on real es­tate de­vel­op­ment, par­tic­u­larly with the new land it opens up for de­vel­op­ment through high­ways and feeder routes.

The bud­get has out­lined re­vival plans for non-func­tional air­ports in part­ner­ship with state gov­ern­ments, with a vi­sion to spend around ₹ 100 to ₹ 150 crore on each air­port to make them func­tional again. This will give a boost to in­fra­struc­ture in many Tier-II and Tier-III cities, and is with­out a doubt pos­i­tive for their real es­tate mar­kets. A se­lect few projects that are com­mer­cially vi­able with good rid­er­ship could pick up pace in the near term.

Go­ing by the bud­get an­nounce­ments, Cen­tral PSUs are go­ing to be en­cour­aged to re­duce their ex­po­sure to ex­cess land hold­ings. While avail­abil­ity of land for de­vel­op­ment is def­i­nitely a con­straint and the Land Ac­qui­si­tion Bill is in­creas­ingly dif­fi­cult to im­ple­ment, an al­ter­na­tive route is to make use of land hold­ings of cen­tral PSUs. We have seen this been done in the rail­ways bud­get, as well.

As far as the retail sec­tor is con­cerned, the re­vamp of the Model Shops & Es­tab­lish­ment Act is a wel­come move and could help the retail sec­tor con­sid­er­ably. Un­or­gan­ised retail could re­ceive a fil­lip as smaller shops will now also be given the op­tion of re­main­ing open for all seven days of the week, like or­gan­ised malls. While this will make the high street retail real es­tate propo­si­tion a bit more at­trac­tive, we will have to wait and see the im­pli­ca­tions from a labour mar­ket per­spec­tive.

Also, as more start-ups get en­cour­aged to com­mence op­er­a­tions, we ex­pect de­vel­op­ers to of­fer more small mixed-use prop­er­ties or ar­range­ments for shar­ing of of­fice space to cater to this seg­ment.

chair­man and coun­try head, JLL In­dia

ISTOCK SOURCE: KPMG IN IN­DIA ANAL­Y­SIS

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