4 key measures that can change Indian realty Relaxation in built-up area and capital infusion limit for FDI, pass through tax structure for Real Estate Investment trusts (REITs), increase in the deduction limit on account of interest on home loan and concessional rate of tax on interest on borrowings in foreign currency extended to all types of bonds are the four important boosts given to the real estate sector in the Union Budget 2014-15. They are expected to ease the financing crunch and reduce pressure on the banking sector. The first and foremost is the encouragement for the development of Smart Cities. With respect to FDI in the real estate, the condition for built-up area has been reduced from 50,000 sq m to 20,000 sq m. Minimum capitalisation norms are reduced from $10 million to $5 million, with a three year lock-in period. To address the severe shortfall in affordable housing, the government has proposed to give exemption from the built-up and capitalisation condition for projects which commit at least 30 per cent of the total project cost for the said category. Mona Chhabra, director-real estate practice, Ernst & Young said, the relaxation will boost mid-sized and small developers to have cheaper capital for their projects, further boosting affordable housing in the country. Vaibhav Sankla, director, H&R Block India Private Limited said, the additional incentive on deduction limit on account of interest on home loan from Rs 1, 50,000 to Rs 2,00,000 may give another boost to youngsters to buy a home. DK Aggarwal, CMD, SMC Investments and Advisors Ltd said that apart from relaxation in FDI and additional incentive on deduction limit, introduction of pass through structure in REITs will significantly ease the inflow of funds into the real estate market. He further added, this will not only ease pressure from the banking sector, but it will also help in channeling small savings of end users into the real estate market. This is primarily on account of small ticket size as prevalent in the Asia Pacific countries. Aggarwal also highlighted the benefits of extension of concessional rate of tax by 5 per cent on interest on borrowings in foreign currency to all types of bonds (earlier confined only to infrastructure bonds). He explained, this will give a significant boost to FII’s inflow, by opening of new channel of borrowing for the Indian corporate sector. He said, any investment into infrastructure and opening of new financing routes will have a multiplier effect on the economy and will help in reducing the fiscal and current account deficit. Read more at: content.magicbricks/industry-news/delhi-ncr-real-estate-news/4-key-measures-that-can-change-indian-realty/72688.html
Posted on: Mon, 21 Jul 2014 11:19:14 +0000
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