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Budget 2016 is a good news for real estate sector

Posted by BrickAcres on March 2, 2016
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Real Estate Investment Trusts (REITs) are likely to become a reality
in India soon as the government moves to remove dividend
distribution tax (DDT) on them. The realty sector has much to cheer
about from the Union budget. Finance minister Arun Jaitley has
removed the last significant tax hurdle in the way of Real Estate
Investment Trusts (REIT), given incentives to first-time home buyers
and tried to make affordable housing more viable.

“From the speech of the finance minister, one of the most-awaited
exemption of Dividend Distribution Tax on the dividend declared by
the portfolio company to REIT and InvIT has been proposed. With this
amendment, all the required fiscal support for REIT and InvIT to make
it a reality has been done. This will support the developer and fund
managers to raise funds through REIT/InvIT and create liquidity,”said
Hemal Mehta, partner, Deloitte Haskins & Sells Llp.

To fuel housing activity under the Pradhan Mantri Awas Yojna,through
which the government has been trying to address the housing needs of
the poor, Jaitley has proposed to give 100% deduction for profits to
an undertaking from a housing project for flats up to 30sq.m. in four
metro cities and 60sq.m. in other cities, approved between June 2016
to March 2019, and completed within three years of the approval.

Minimum Alternate Tax (MAT) will, however, apply to these
undertakings. It has also been proposed to exempt service tax on
construction of affordable houses up to 60sq.m. under any scheme of
the central or state government, including public-private
partnership schemes.

In Budget the annual housing rent reduction limit has been
increased from Rs 24000 to Rs 60000 could lead to an almost
immediate uplift for rental housing across the major cities. This
can also potentially encourage the sentiment for home ownership in
the long run,” said Kishor Pate, CMD, Amit Enterprises Housing Ltd,
reacting to the Budget.

Also, first-time home buyers have been given the benefit of an
additional deduction of Rs. 50000 on home loan interest for loans
not exceeding Rs 35 lakh, where the value of the house is no more
than Rs 50 lakh. This will result in improved home buying sentiment
in smaller cities with lower housing costs. An improvement in
sentiment will also be seen in the cheaper far suburbs of the
metros.

“Housing for all seemed to be the flavour of the real estate part
of the budget presented on Monday. The direct and indirect tax
benefits for affordable housing is expected to catapult the
smart-city initiative. Additional deduction of interest would
incentivise the first home buyers to own the houses,” said
Bhairav Dalal, partner – tax, at consultancy PwC India.

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