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Union Budget 2018-19: A Ray Of Hope For The Real Estate Sector

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Union Budget 2018-19

Setting the stage for a robust recovery in the residential property market, the “Housing for All by 2022” mission is here to bring change. Last two years are seeing an unprecedented focus on reforms, channelized through the Benami Transactions (Prohibition) Amendment Act 2016, Real Estate Regulatory Act (RERA), the Goods and Services Tax (GST) regime and Demonetisation. Therefore, the Union Budget 2018-19 will be playing a critical role in the real estate sector.

 

As Union Budget aims to provide an opportunity to the Government in tweaking the direction of the Indian economy every year. More often, the hard decisions taken by the government does not go well with the citizens.  If aimed for a positive direction, the new provisions will have the power to continue the momentum and cement home buyers’ confidence.

 

Therefore, sometime, when an incumbent Government is finishing its term and general elections loom, the Union Budget turns out to be a crowd-pleaser. The present Government has done quite a lot for the Indian real estate industry, many of its hard decisions were disruptive like demonetization but also very necessary like RERA, which are important for the growth of the real estate sector.

 

With the hard decisions taken, now the Indian real estate sector fervently hopes that this benevolence needs to go beyond improving personal finances and the implied boost to real estate investment appetite.

 

It will be worthwhile to rationalise further the direct tax structures, to enhance the effect of post implementation of the tough decisions in the recent past. As still there exist a room for improvement in some of the prime income tax (IT) provisions that are meant to incentivise the home buyers.

 

Despite the Government’s strong stance towards regulating the sector, still there are several policy-related important points, where work could be done. One of the major issues is the single-window clearance. This demand for single window clearance mechanism is yet to be fulfilled, although many initiatives have been taken to create a conducive business environment in the sector

 

If successfully implemented, single-window clearance can significantly reduce the overall projects cycle time and the builders will be able to focus on project execution. The importance of single-window clearance has further increased since the implementation of RERA, underlining its role in facilitating the smooth clearances and approvals, without any execution delays by procedural hindrances.

 

As of today, the first Real Estate Investment Trust (REIT) is yet to be listed in India. For the listings to start flowing in, REITs are the critical requirement, which will enhance the participation of a much broader bandwidth of investors.

 

Higher income tax benefits have always been important for the residential real estate sector. At present, there is an additional tax deduction for the first-time homebuyer up to INR 50,000 per financial year under section 80EE of the Income Tax Act. Therefore, to encourage the first-time home buyers, tax exemption should be increased.

 

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