Budget 2016-17: Below Expectations, But With Some Major
Positives
By Mr.
To give him due credit, the Finance Minister Mr. Arun
Jaitly has definitely made a concerted attempt to manage expectations with a
balanced budget.
While
3 of the real estate sector’s major expectations –
increased HRA deduction, removal of DDT from REITs and boost to affordable
housing by allowing 100% deduction on profits made by entities constructing
them – have been addressed, the Budget 2016-17 offered no financial protection
from project delays to home buyers.
Most
first-time home buyers in the major metros will be left out of
the additional Rs. 50,000 income tax
exemption announced today (Feb 29, 2016), as it is applicable only on houses
worth up to Rs. 50 lakh with loans of up to Rs. 35 lakh for houses.
This announcement will mostly benefit first-time home
buyers in tier-III and tier-II cities. The infrastructure sector was a major
beneficiary today.
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| Anuj Puri, Chairman & Country Head, JLL India |
The biggest announcement with implications for the real
estate sector in India was removal of DDT from real estate investment trusts
(REITs).
REITs could
become a reality soon – The Dividend Distribution Tax (DDT) got exempted,
clearing a final hurdle on the way of the successful listing of REITs in India.
We expect a few listings to happen in the current year
itself, either by financial institutions or developers.
Currently, about 229 million sq. ft of office space can
be seen as REIT-compliant. If we assume
that even 50% of these get listed, we are looking at a total REITs listing
worth USD 18.5 bn.
Road
infrastructure and new land opening up – About 16-18 km of road
construction per day has been achieved by the middle of the current financial
year, and the Budget has adopted measures to significantly step up NHAI
capabilities in this regards.
Roads
infrastructure has great influence on real estate development, particularly
with the new land it opens up for development through highways and feeder
routes.
Infrastructure
creation – The Budget has outlined revival plans for non-functional
airports in partnership with state governments, with a vision to spend around
INR 100-150 crore on each airport to make them functional again.
This will a boost to infrastructure in many tier-II and
tier-III cities, and is without a doubt positive for their real estate markets.
A select few projects that are commercially viable with good ridership could
pick up pace in the near term.
Release of land
– Going by today’s Budget announcements, Central PSUs are going to be
encouraged to reduce their exposure to excess land holdings.
While availability of land for development is definitely
a constraint and the Land Acquisition Bill is increasingly difficult to
implement, an alternative route is to make use of land holdings of central
PSUs. We have seen this been done in the railways budget, as well.
Retail
sector – The revamp of the Model Shops & Establishment Act
is a welcome move and could help the retail sector considerably. Unorganised
retail could receive a fillip as smaller shops will now also be given the
option of remaining open for all seven days of the week, like organised malls.
While this will make the high street retail real estate
proposition a bit more attractive, we will have to wait and see the
implications from a labour market perspective.
Office
occupancy perspective :
The Budget made a strong case for promoting start-ups in
India with 100% tax rebate on profits announced for them for three years.
In the recent past, we have seen successful start-ups
(particularly in the technology and eCommerce sectors) becoming big and
occupying a commendable share in office space. As more start-ups get encouraged
to commence operations, we expect developers to offer more small mixed-use
properties or arrangements for sharing of office space to cater to this
segment.
Importantly, clarity is expected on GST implementation.
The House got adjourned today when the Financial Bill came up but the FM had
earlier said the government will strive to get it passed.
For Media Contact
Mr.Arun
Chitnis
Head – Corporate Communications & Media Relations
JLL India
Pune - 411 001.
Tel: (020) 30930441 Fax: (020) 40196101
Mob: +91 96571 29999
Website: www.joneslanglasalle.co.in
Twitter: @JLLIndia
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