Budget 2015-16: How does it benefit the real estate industry in India
Finance minister Arun Jaitley on Saturday presented the first General Budget of Narendra Modi's government. The much anticipated budget is clearly is development focused. However, Budget did not have much for Real estate. It has promised a huge outlay for Infrastructure development – specifically road networks, power generation and housing. MakaanIQ highlights some announcements that will boost the India property market.
Here are some highlights-
1. Housing for all by 2022: The Finance minister has made an allocation of 22,000 crores towards the most ambitious project of the govt – housing for all. The minister has pegged to construct 6 crore home. The announcement stated that 4 crore homes are to be built in the urban area whereas the remaining 2 crores are to be built in the rural area.
2. Goods and Service tax (GST): A uniform rate of tax across the country which would be same across goods and services. This will reduce taxes on higher taxed goods and services and increases taxes on the lower ones. However, it is anticipated to reduce the overall tax burden on consumers. This points will surely become a discussion point and a feel good factor.
3. DMIC project: The Finance Minister has allocated Rs. 1,200 crores for the ambitious DMIC (Delhi Mumbai Industrial corridor). This will boost real estate development close the corridor. This will lead to development of satellite towns around the two major hubs of India.
4. REITs (Real Estate Investment Trust): REITS received a major boost as budget proposes rationalizing capital gain tax regime which will benefit commercial real estate developers, this move will bring clarity and financial stability in the realty market.
5. Elimination of Wealth Tax: Elimination of wealth tax and introduction of surcharge of 2% on the super rich whose income is of Rs 1 crore or more will boost the overall sentiment of the market. Now majority of home buyers will not have to pay any tax on property ownership as only the super-luxury homes will be taxed. This announcement will come as a big relief for the middle class home buyers.
6. Construction of addition 100,00 km of road: Road development which is so crucial for the overall development will get a major boost by this announcement. Better road connectivity between the cities will lead to more development and time saving. People will not hesitate to make investment if they are able to cover a distance of 100-150 kms in a matter of few hours.
7. No Announcement on Smart Cities: However, the biggest disappointment in the budget was a non announcement in regards to the 100 smart cities. More flavor on this would have definitely cheered the industry more.
8. Increase in Service Tax: Another major disappointment was an increase in service tax, which has resulted in lower purchasing power in the hands of consumers.
Overall the real estate industry would be happy with the budget announcements. It has started a long term positive trend for the sector.