We are extremely excited about the government’s move of giving ‘Infrastructure status’ to affordable housing as this is the biggest boost to the real estate sector because it will make funding easier. This will also play a critical role in achieving PM’s dream of ‘Housing for All’ by 2022 and increase the participation of private players in the sector. The industry that was struggling in the last couple of years, on the number of product launches, will get a boost through this move.
Another interesting aspect is a reduction in corporate tax rate for MSMEs having revenues less than Rs 50 Crore to 25 percent. The government had introduced a profit-linked income tax deduction for promotion of affordable housing which was not well accepted because it had certain constraints and parameters which were not practical. But, by increasing the ambit of the scheme, a key announcement of counting the carpet area instead of built-up area, for Affordable Housing of 30 (Metro) and 60 (rest of India) square meters, will broadly increase housing sizes and hence the scheme will now have a true impact on the sector. Also, the tax benefits period has been increased to 5 years which was 3 years earlier.
The budget proposes to change the prevalent practice and has clarified that the landowner entering into a joint development agreement for development of the property, shall be subject to capital gains tax upon completion of the project. This is a significant change, because it will now make joint development agreements easier which in turn will lead to increase in supply of projects.
