#UnionBudget2016: From Mister Finance Minister To Real Estate, With Love
While Finance Minister Arun Jaitley's Union Budget for the financial year 2016-17 can easily be termed as pro-poor, it also announces measures that would help India's neo-urban population. Among these measures are the benefits announced for the real estate sector. Along with various long-pending tax benefits, affordable housing and encouraging first-time home buyers have been the finance minister's focus areas.
Of his Budget speech, PropGuide lists five measures that would help home buyers and developers in the country:
HRA exemption increased
Section 80GG of the Income-Tax (I-T) Act provided for a deduction of up to Rs 24,000 per annum. This ceiling has been raised to Rs 60,000 per annum now. This deduction is available to people who do not receive HRA (house rent allowance) as a component of their salaries. This move will be a huge relief to the taxpayers who neither own a house nor get an HRA from their employers. The earlier limit was not realistic keeping in view the prevalent market rates. Renting accommodation would also be easier now, as people will have more money at their disposal.
Additional deduction for first-time home buyers
For the first-time home buyers, the finance minister has announced an additional deduction of Rs 50,000 on the interest paid on a loan amount of up to Rs 35 lakh. The total value of the house has been capped at Rs 50 lakh. This would encourage more people to invest in the real estate sector, helping it battle the existing slump.
Removing DDT on REITs
Real Estate Investment Trusts (REITs) in India were unable to take off mainly because the imposition of the Dividend Distribution Tax (DDT) . With the removal of DDT, developers would now be able to raise funds from the market in an affordable manner. This move will also make investment in real estate easy for investors. REITs would benefit the entire sector by opening an alternative source of finance to the developers.
Service tax exemption for affordable housing
The Budget proposes to exempt houses with an area of less than 60 sq mt from service tax. This would be applicable on projects undertaken under Central state government schemes and public-private partnership (PPP) mode. Affordable housing has been the focus area of the current government. The aim of Housing for All by 2022 can be realised by providing for such incentives to the real estate developers. This exemption would facilitate further lowering the cost of housing projects and allow these projects to come within the reach of low- income people.
100% deduction for profits of undertakings from housing projects
For housing projects that have flats up to the size of 30 sq mt in the four metro cities and up to 60 sq mt in non-metro cities, the government proposes to give full exemption on the profits earned. These projects should be approved during June 2016 and March 2019. However, the minimum alternate tax (MAT) would still be applicable on such projects. This move will give push to fresh housing projects in cities and developers would be encouraged for timely completion of projects.