Mr. Sandeep Ahuja, CEO – RICHA REALTORS – Given the fiscal constraints the Finance Minister has given an excellent budget. Most importantly he has committed to implement the GST from 1st April, 2016 and has also committed to remove exemptions and decrease the corporate tax rate from 30% to 25% over the next 4 years. For the real estate sector following are the important points to note
- Tax pass through on REIT’s is an excellent and much required move. We still have to look at the specifics of how capital gains will be rationalized during REIT listing.
- The proposal to construct 6 crore new houses in urban and rural areas by 2020 is also an excellent initiative. However the details have not been promulgated. This is probably going to be a medium term move and not a short term move
- The overall funding environment will improve because of a host of measures. NBFC’s will now have access to SARFAESI, the government will promulgate a comprehensive Bankruptcy Code in 2015-16 and AIF’s will now have pass through status. This will improve availability and transparency of funding.
- The modification of the PE (Permanent Establishment) norms will reduce some regulatory grey areas and will also result in some high end jobs moving from Singapore and Hong Kong to India (mostly Mumbai). Thus mid to high end housing projects in Mumbai will also benefit to some extent from this move.
- The government has given clear cut indications that they intend to move towards a more cash less society. The FM also specifically mentioned that he wants to decrease black money in real estate. This will help developers with good corporate governance and will help towards a consolidation from smaller fly by night developers to more established developers with good corporate governance. This along with the new bankruptcy code will be negative for developers with low corporate governance.
- The government has also stated clearly that controlling inflation will be a formal objective of the RBI. This will result in lower interest rates in the short and medium term and will increase affordability for end users.
- One negative will be the increase in service tax rates from 12.36% to 14% and the increase in central excise duty to 12.5% from 12.36%.
- There has been no comment on the Real Estate Regulation Bill but it is expected to be taken up outside the purview of the budget.