Budget has no direct impact on Real Estate, focus continues on Infrastructure and revival of consumer demand

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JLL rates Budget 3/10 for the real estate sector

The Union Budget announcement today continues to focus on affordable housing and infrastructure, more specifically, urban infrastructure and logistics. However we do not see significant impact on the realty sector.

Keeping in mind the limited fiscal room available to the Government, the focus of the Budget is to increase liquidity and enhance consumer demand through extension of benefits and simplification of personal income tax.

· Emphasis on ‘Study in India’

o Will provide a significant boost to student housing which is set on a higher growth trajectory

· Private sector policy on data centre parks across the country

o JLL estimates USD 4 billion investment opportunity for data centres

o Industry capacity to grow from 350 MW in 2019 to 781 MW in 2024

o Industry revenue to triple in the next five years to USD 3.2 billion in FY 2024

· National Logistics Policy and viability gap fund for development of Warehouses

o To provide impetus for increasing warehousing supply

o Supply expected to rise from 211 mn sq ft in 2019 to 379 mn sq ft in 2023

o Net absorption of 36 mn sq ft in 2019 to get further boost

o Single window clearance to expedite supply as approval time expected to reduce by 6 months

· NBFC eligibility for SARFAESI Act reduced from INR 500 cr to INR 100 cr Assets Under Management

o To empower more NBFCs to recover funds in stalled real estate projects

o Provide opportunity for funds to invest in stressed assets

· Enhanced focus on infrastructure – INR 1.7 lakh crore allocated to transport infrastructure including railways

o Delhi-Mumbai expressway to be completed by 2023

o Bengaluru-Chennai expressway to be completed by 2023.

o Government to provide 20% equity for Bengaluru Suburban Transportation Project

o 100 more airports to be developed by 2024

o 5 new smart cities proposed

Continued focus on affordable housing

· Extension of benefit u/s 80EEA to avail additional INR 150,000 interest deduction on home loans for first time home buyers

o This benefit (currently available for home loans sanctioned between April 1, 2019 and March 31, 2020), has been extended until 31st March 2021. This will continue the benefits the first time home buyers.

o Considering that a majority of home buyers fall in the lower and mid-income segments, this tax benefit will boost demand substantially.

o Will significantly benefit first time home buyers who will enjoy the benefits of interest subvention under the CLSS scheme and the extended tax benefits.

· Time extension to claim 100% tax deduction on profits from affordable housing projects until March 2021 u/s 80IBA

o This extension in the dateline will ensure continued interest of developers for the construction of affordable housing projects and help achieve the “Housing for All” objective of the government.

· Abolition of Dividend Distribution Tax and 100 % tax exemption for Sovereign Wealth Funds infrastructure investments with minimum lock-in of 3 years

o Investments in logistics and warehousing to get boost

o Investments in affordable housing projects to get more fillip