ICRA’s Expectations from Union Budget 2018-19 on Real Estate sector — Shubham Jain Vice President and Sector Head- Corporate ratings,ICRA Limited

New Delhi, January 16, 2018: From the upcoming budget, real estate sector stakeholders will be eagerly expecting measures that will boost demand over the near to medium term. In this respect, expansion of the income tax deductions available to home buyers can incentivize first time buyers and support demand growth. The deduction available on principal repaid on loan taken for acquisition of a residential house property, which is currently capped at Rs. 1.50 lakh under section 80C, can be increased to improve the purchasing power of the buyers. Also, priority sector lending status for home loans upto a specified limits, for example Rs. 60 lakhs for metro cities and Rs. 45 lakhs for non-metro, may further boost demand in the near to medium term.

Secondly, the government’s efforts on affordable housing segment can be further intensified by augmenting the current schemes and relaxing eligibility criteria. Existing provisions under section 80-IBA permit 100% deduction in respect of the profits derived from developing and building certain housing projects subject to specified conditions, including maximum unit size of thirty square metres in the metro cities and sixty square metres elsewhere. Increase in the qualification carpet area to , say,  150 square metres will be beneficial and encompass a larger spectrum of projects. Further this will also align the benefit with the qualification criteria under MIG-I and MIG-II of credit linked subsidy scheme (CLSS). Further, the budget allocations for the CLSS scheme for the next year can be further augmented in line with the strong response witnessed, especially in the EWS / LIG segment. It is estimated that in the current year, subsidy sanctioned and disbursed in the segment has been far higher than the initial budget estimate of Rs 400 crore for the year.

Lastly, the government has also been pushing for REITs to be developed in India as an asset class. However, due to various reasons, there has not been any listing  in the country till date. Though major taxation related hurdles had already been resolved in previous years, if the budget can streamline and relax some of the pending issues such as dividend distribution tax applicability for subsidiaries which are not wholly owned, reduction of holding period for long term capital gains applicability on REIT units, MAT on transfer of shares of SPV to REIT, etc, it can support the development of REITs in the country.

Corporate Comm India(CCI Newswire)