Union Budget 2017


The Union Budget 2017 saw a lot of positive announcements for the housing sector, both for home buyers and for developers. In this article, we look at the highlights of Union Budget 2017 for the realty sector.

Infrastructure status to affordable housing:
Among other things, budget 2017 places a clear emphasis on affordable housing. In order to encourage investments in this area, the government has proposed to award infrastructure status to affordable housing projects. This move is expected to bring down the cost of funding for developers, which in turn should reduce the cost for home buyers. The total budget allocation for infrastructure for 2017-18 is Rs. 3,96,135 crores.

Reduction in tenure of long-term capital gains:
Budget 2017 proposes to reduce the holding period for land and buildings to 2 years (from earlier 3) for purposes of long-term capital gains. This means, real estate investors can now make an exit faster, whether for profit booking or for switching their investments. This should make real estate an attractive investment option viz-a-viz other assets like stocks.

More projects now under the gambit of affordable housing:
In the previous budget, houses with built up area of up to 30 sq. m. and 60 sq. m. were allowed tax deduction of 100% on profits. In this budget, this has been changed to carpet area basis, which means more projects will now be able to benefit from this exemption.

Increased tenure for notional tax on unsold inventory:
Presently, developers have to pay tax at a notional rental income on houses, which have a completion certificate, but are unoccupied. In the latest budget, the finance minister has proposed to apply this rule only after a year of receiving the completion certificate. This move is expected to give some breathing time to developers to liquidate their inventory, which in turn, should boost investment in the sector.

Refinancing of Individual Housing Loans:
National Housing Bank will be refinancing individual housing loans of nearly Rs. 20,000 crore in 2017-18. Also, banks have already started reducing interest rates for home loans, thanks to the surplus cash generated due to the demonetization drive in 2016. All this should bring a relief to existing home loan borrowers and should improve the overall sentiment of the sector.

Joint Development Agreements to get a Boost:
The finance minister Mr. Arun Jaitley has proposed a capital gains tax for joint development projects to be paid 1 year after the project is completed. This is great news for land owners. Earlier, while entering into an agreement with the developer, landowners were required to evaluate the price of the land and pay tax on notional gains right at beginning. The new proposal will encourage more and more landowners to enter into joint development agreements, thereby increasing the supply of land, and eventually the supply of properties.

In summary, budget 2017 is one of the landmark budgets as far as housing sector is concerned. At The Wadhwa Group, we welcome the government’s initiatives to boost affordable housing and provide housing for all.


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