Expectations of Real Estate Sector from Budget 2019
- Wednesday 3rd July 2019
- Author: Shreya Uppal
With the Modi Government back in action, there are fresh rays of hope amongst all the sectors. The previously done reforms in the last 5 years have added momentum to the Indian Economy
In order to boost the sector, the government may consider abolishing Minimum Alternate Tax under Section 115JC of the Income Tax Act.
Expectation for cross utilization of tax benefit from residential to commercial or vice versa.
Reforms in REIT structure in India
With the Modi Government back in action, there are fresh rays of hope amongst all the sectors. The previously done reforms in the last 5 years have added momentum to the Indian Economy. The Union Budget for 2019-2020 will be presented by the First Female Finance Minister, Mrs. Nirmala Sitharaman on 5th July, 2019.
The Real estate sector being the backbone of the economy expects some positive measures from the Government to revive the sector in addition to the steps already taken by the government in the Interim Budget published on 1st February 2019.
Some of the Expectations have been described below:
1. Increasing Tax Holidays
In order to incentivize the promoter to redevelop and at the same time help the objective of the government to achieve ‘Housing for all by 2022’, the Government may consider extending Tax Holidays provided to Affordable Housing to redevelopment projects of slums and housing societies comprising of dilapidated buildings.
2. A solution to Liquidity Crunch
The choking liquidity is perhaps the major reason that is hindering a smooth and steady growth for this sector. The distress in the NBFC (Non-Banking Financial Company) has further aggravated the situation. The realty sector is expecting the government to ease ECB (External Commercial Borrowing) norms, to ensure a steady inflow of capital from foreign investors. For ambitious government welfare schemes, such as the ‘Housing for All’ initiative to be a reality, such reforms are prerequisites.
3. Taxation benefits
There has been a drastic fall in the development of SEZ projects in recent times. In order to boost the sector, the government may consider abolishing Minimum Alternate Tax under Section 115JC of the Income Tax Act. Tax incentives may also be made available to new asset classes such as warehousing and logistics, co-working spaces, hospitality, shopping centers, business parks, etc. The promoters expect the Government to consider reduce the GST rates so that the sale of the commercial properties and residential property can be increased accordingly.
4. Industry status to real estate sector
Infrastructure status will benefit the industry by way of lower borrowing rates, increased flow of foreign and private capital, etc. which will help this sector to flourish more.
5. Utilization of Cross benefits
Till date, the Government is not allowing the tax benefits for the use of sale proceeds of Residential properties to buy commercial properties and vice versa. Experts are hoping that the Government will take initiative on this.
6. Reforms in REIT
In the commercial sector, REIT’s have already broken many records. It has not only fuelled up the liquidity factor in the market but also has increased the flow on institutional funds in the commercial sector. The first blockbuster REIT IPO of Embassy and Blackstone (Embassy Office Parks REIT) which has raised almost Rs.4750 crore from the Indian market just amazed everybody with such level of figures.
7. Widening the RERA Implementation
The major reforms executed by the Government in the Real Estate Sector was the introduction of the RERA Act, 2016 to infuse transparency and speedy dispute redressal. However, some of the major points need to be looked into regarding its implementation like the introduction of Single Window Clearance is a must for this sector. Moreover, lack of orders execution powers with RERA is questioning its formation (power of recovery of penalties by the RERA Authorities have not been given). The matters of discussion must include the states like Assam, Arunachal Pradesh, Kerala, etc, which have not established its official website till date.
We all are looking forward towards the Union Budget to shower most of its benefits on this sector. Let’s hope for the best because this sector truly needs the support of the Government to flourish more!!!
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