The Union Budget 2014-15 has laid substantial emphasis on the real estate sector, with several announcements for the housing industry.
Finance Minister Arun Jaitley, while presenting the Budget for 2014/15, said that Real Estate Investment Trusts (REITs) would soon be allowed.
REITs, which are a fairly successful concept internationally, would get a tax pass-through status. Infrastructure Investment Trusts would get tax benefits as well.
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Neeraj Bansal, Partner and Head, Real Estate and Construction, KPMG in India, says incentives to REITs and granting pass-through status for taxation is a welcome and essential step for successful implementation of REITs in India.
"It will help in easing liquidity requirement for developers, paving the way to raise easy capital and also provide access to retail investors to benefit from regular income and appreciation benefits from real estate," he says.
It would, however, be interesting to see how the largely unorganised real estate industry in India would respond to development of REITs, which are mostly organised.
"Finance Minister Arun Jaitley has brought a much-needed relief to the sector by announcing a handful of measures and allocations... which is an absolute positive sign for the real estate sector," says Surabhi Arora, Associate Director, Research, at real estate services company Colliers International.
About Rs 4,000 crore has been allocated for low-cost housing, and Rs 50,000 crore has been set aside for urban housing. An Infrastructure Investment Trust would also be developed to provide a boost to the sector. To lessen the burden on bigger cities, Rs 7,060 crore has been allocated for the development of 100 smart cities.
The encouragement is not just on the real estate development end, but also working on boosting consumption in the housing sector. The housing loan rebate on self-occupied property has been increased from Rs 1,50,000 to Rs 2,00,000.
"An increase in disposable income in the hand of the common man will in turn increase the spending power and boost domestic investment. This increase will promote home ownership and give boost to the housing sector and other related industries like steel, cement, brick, wood, glass," says Arora.