Comments
No major proposals for the real estate sector this time around, compared to a slew of tax measures announced last year. But, the budget lays down an ambitious goal to add six crore homes by 2022 under the ‘Housing for All’ scheme .
There were changes made in tax treatment of Real Estate Investment Trusts (REITs). There is an increase in service tax to contend with.
The backgroundBuilding affordable housing remains a challenge due to escalating cost of land, approval delays and high borrowing costs. Support in the form of speedy approvals, cheaper sources of funding as well as incentives to buyers will make these projects financially attractive for builders.
An allocation of ₹14,000 crore has been made, though funding details are not yet clear.
The budget clarifies some of the tax related concerns that lingered after REITs were announced in July 2014. Also, owners who listed their property by selling REIT units were required to pay capital gains tax. Doing away with this and requiring payment of service tax would incentive more commercial property owners to list assets such as office building and malls to raise much needed cash.
While these measures are positive, higher freight rates on coal, iron, steel and cement announced in the railway budget may impact profitability for developers. The housing market has been weak in many cities and developers may not be able to pass on these escalations to buyers. And for home buyers, who already pay substantial registration and other charges, may feel additional burden from the increased service tax rate.
The verdictTax status change on REITs will provide a boost to developers such as DLF, Phoenix Mills, Prestige Estates and Oberoi Realty who own rent producing commercial property.
The general thrust on urban and rural housing will help developers such as NBCC, Mahindra Lifespace and HDIL who have a presence in affordable housing segment. The rental income earned by REITs will now be taxed in the hands of the unit holders.
Home-buyers to be hit by higher service tax rate.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.