The Union Budget presented by Finance Minister Arun Jaitley on Monday has left big smile on the faces of first time home buyers by giving them an additional tax exemption of INR 50,000 for housing loans upto INR 35 lacs. Also, the removal of a tax hurdle in the way of REIT’s (Real Estate Investment Trust)is a boon to commercial real estate investors and developers.
“The focus of the Union Budget has traditionally straddled the theme of housing for all and for good reason. It is no different this year, with 100% deduction for profits to affordable housing projects that are building homes up to 30 sqm in the four metro cities and 60 sqm in all other cities. This time around, there is reason to smile for CRE (Commercial Real Estate) too. With the budget excluding REIT’s from the ambit of DDT (Dividend Distribution Tax), it seems that all related fiscal hurdles have been cleared. It’s now upto how and who makes the first courageous move towards India’s very first REIT listing. If all things go well, we’ll soon see much sought after liquidity, retail investor participation, structure and market awareness in Indian CRE.” said Shubhankar Dongre, Co-Founder, Propstack.
Under the Pradhan Mantri Awas Yojna, the Finance Minister has proposed to give 100% deduction for profits to an undertaking from a housing project for flats up to 30 sqm in four metro cities and 60 sqm in other cities, approved between June 2016 and March 2019, and completed within three years of the approval. It has also been proposed to exempt service tax on construction of affordable houses under 60sqm under any scheme of the central or state government, including public-private partnership schemes. This has been done to boost housing activity and to address the housing needs of the poor.
REIT’s are on their way to becoming a reality in India soon, as the government removes DDT. This will create liquidity to commercial real estate developers and growth opportunity for retail & institutional investors. The DDT exemption holds true for cases where the trust holds 100% of the share capital of the SPV and dividends are paid out of the current income rather than accumulated income.
