How Will The Budget 2017-18 Impact Real Estate

With the release of Union Budget 2017-18, there were several positive measures undertaken for the real estate sector. Let’s take a look at some of the highlights pertaining to real estate and their impact:

1) Infrastructure status: The Affordable housing sector has been granted Infrastructure Status. This was a welcome move and will act as a catalyst to the Prime Minister’s vision of providing Housing for All by 2020. This initiative will give developers access to cheaper funding and will attract more investors.

2) Loan Refinance: National Housing Bank will refinance individual loans worth Rs 20,000 crore in 2017-18. This will give a major push to affordable housing companies.

3) Tax exemption: The Government has also proposed 1 year tax exemption from notional rental income from unsold but ready inventory. This is a great move in providing tax relief to developers in the residential sector who are holding real estate inventory, where the sales dropped significantly due to demonetization.

4) Reduction in holding period:
The holding period has been reduced from 3 years to 2 years in case of long term capital gains from Immovable properties, providing respite to investors.

5) Change in base year:
The base year for calculating the indexation for long term capital gain has been shifted from 1981 to 2001. As a result, resultant gain will reduce and in turn will lower taxation.

6) Capital gains on Joint Development Agreement (JDA):
Capital gains on JDA to be taxed only after the project completion. This will give a great boost to unlocking land for development and will reduce litigation.

7) Cash Ban:
A total ban on cash transactions of Rupees 3 lakh and above has been proposed.

8) Pradhan Mantri Awas Yojna (PMAY) gets a boost:
The Government allocated Rupees 23,000 crore to PMAY for completing one crore houses by 2019 for those living in kachha houses.

9) Rate of Interest on Home loans:

Rate of interest on housing loans will further come down.

10) Increase in size of affordable housing:
The Government provided 100% tax exemption on profits for developers building homes with built up area up to 30 sq meters in metros and 60 sq meters in other cities. The new budget stated that instead of built up area; the carpet area will be applicable for affordable housing.