Housing sector has turned out to be the primary beneficiary of Budget: J C Sharma, Sobha Limited

By J C Sharma, VC & MD, Sobha Ltd.

This year’s annual budget makes the right case with the impetus it provides for the country’s largest employer, agriculture, and for strengthening the social sector. Another creditworthy act is the massive hike it proposes in public spending on infrastructure to Rs. 2.21 lakh crore, an increase of 22.5% over the previous year and a step that will have positive ramifications across all forms of economic activity, from services to manufacturing.

This budget presents a balanced picture overall and its growth orientation offers immense capacity to unlock various initiatives taken by this Government. As far as the housing sector is concerned, it has turned out to be the primary beneficiary of the budget for, while cars, luxury items, jewellery, travelling, dining and tobacco have all become costlier, the housing sector has gained much needed attention.
We believe that the 100% deduction for profits to an undertaking in housing project for flats up to 30 sq. metres in 4 metros and 60 sq. metres in other cities approved during June 2016 to March 2019 and completed in 3 years will encourage supply in the affordable housing segment.

The proposal that distribution made out of income of SPV to the Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (INVITs) having specified shareholding will not be subjected to Dividend Distribution Tax (DDT), in respect of dividend distributed after the specified date, is a progressive step. This also meets a demand often raised during the last several months and perceived as a reason for a REIT instrument not being listed so far. This proposal will likely promote REITs, thus attracting new investments to the sector.
Another good step is the deduction on additional interest of Rs. 50,000 per annum for loans up to Rs. 35 lakhs sanctioned in 2016-17 to first time home buyers, where the cost of the house itself does not exceed Rs. 50 lakh. This is directly beneficial for both buyers and sellers and one that we believe will perk up market sentiments.

The exemption from service tax on construction of affordable houses up to 60 sq. metres under any scheme of the Central or State Government including PPP Schemes is another step in the right direction at the right time.

One proposal that augurs well for the rental segment of the housing sector is the exemption for rent paid going up from Rs. 24,000 to Rs. 60,000, which is in line with nature of demand for housing across our towns and cities.

Furthermore, the excise duty exemption presently available to concrete mix manufactured at the site for use in construction work being extended to ready-mix concrete is a welcome move for the industry and one that makes complete sense.

A bane of our country is its woeful status with regard to the availability of land records, a source of much trouble. The proposal to digitize land records is in the right direction and one that will render land records free from encumbrances. These proposals, we believe, are sure to encourage the country’s housing sector.