Knight Frank – Shishir Baijal’s reaction to Union Budget 2016-2017
Overall, the Union Budget augers well for the real estate sector, having addressed Affordable Housing, REIT and Infrastructure.
The housing sector will get a push from both supply and demand side. The first time home buyers will be encouraged since they get an additional deduction of Rs.50,000 on interest for loans up to Rs.35 lakh and a house value of Rs.50 lakh. In effect, it will reduce the cost of loan which will boost the demand for housing in the budget to mid segment. On the supply side, 100% exemption of profit for developers and exemption from service tax for construction of houses less than 650 sq feet will encourage supply in the affordable housing segment.
REIT has finally got its due with the abolishment of the DDT that was holding back asset owners. This is a welcome move for the industry. There will be no road block in launching REIT schemes any time now.
Infrastructure and rural development focus in the Budget has been encouraging and is expected to give the much needed fillip to the real estate sector. With massive push in infrastructure (huge outlay for roads and railways and developing smaller airports to improve regional connectivity) and incentives to MSME, Make-in-India will get a further boost that will benefit the real estate sector in the long run.
Additionally, the government’s focus on digitization of land records as spelt in the Union Budget is in the right direction especially in the rural areas, which will render land records free from encumbrances.