Reactions from Constructions Industry on Union Budget 2016-17

Amit Bhosale, Managing Director, ABIL – Good focus on infrastructure and road development. Good to know that 80% of the road development projects, which were stuck due to some or the other reasons have been brought back on track. If Government is able to achieve their target in road development as suggested by them, it will provide major boost to multiple sectors including housing. It is also good to see that Government has announced certain benefits for affordable housing. This will encourage more developers to get into this segment.

Nitin Kulkarni, Director, Vastusbodh Projects – A welcome budget for Affordable Housing in line with the government’s mission of Housing for All. We are happy to see that many of our suggestions made to the PMO and MoHUPA (Ministry of Housing and Urban Poverty Alleviation ) are included in the budget. But we will have to go through the Finance Bill in detail to get clarity on some issues as detailed below.

Income tax exemption (similar to 80IB) for all projects having flats with less than 60 sqm carpet area (in line with definition of the credit linked subsidy scheme) is offered. However, timeline for period of completion of project is kept at 3 years, which is difficult when project sizes are bigger. Typically, affordable housing business is a volumetric business and are of greater scale, the tenure for completion should be increased to a 5 years.

Moreover, it is extended for projects which will be sanctioned between June 2016-March 2019, not for ongoing projects. We have several projects which are already under various stages of construction and I feel it should have been extended to all projects reporting profit during FY2016-2017 and beyond.

Service tax exemption for all flat buyers of affordable housing is proposed with a hitch that it will be under State on Central schemes or in a Public Private Partnership.  The same has to be extended to all buyers of private sector also since MoHUPA also understands the role of private participation in achieving Housing for All.

Excise duty exemption for Ready Mix Concrete is offered based on our recommendation to the Ministry. However, the same benefit has to be passed on to Precast (factory made) construction components.

As regards the individual home buyer, except for the additional interest exemption of Rs 50,000, there is nothing much in it for him. Overall, a wonderful budget drafted by the Finance Minister clearly supporting the Governments focus on Rural development, healthcare and infrastructure development.

Vishal Gokhale, MD, Gokhale Constructions – Few welcome steps to help the ailing real estate sector. Steps like additional exemption of Rs.50000/- for housing loans up to Rs.35 Lac provided the cost of home is less than 50 Lac is a welcome step for first time home buyer. With service tax exemption for affordable homes and tax benefits for creators of affordable housing, the segment of affordable housing will take off to fulfil Prime Ministers dream of ‘Housing for All’. However, it would be interesting to see how far will these schemes be applicable and beneficial for private developers, since they would have great role to play in achieving ‘Housing for All’.

Though, some attention is given to affordable housing, the general housing sector does not have much to cheer for. Especially, housing in Urban India, where prices of homes are more than 5 Lac. A lot was expected for the revival of housing sector.

Kishor Pate, CMD – Amit Enterprises Housing Ltd. –  This Budget could have done a lot more for the real estate sector. However, there were some positives. The fact that the annual housing rent reduction limit has been increased from Rs. 24000 to Rs. 60000 could lead to an almost immediate uplift for rental housing across the major cities. This can also potentially encourage the sentiment for home ownership in the long run.

Also, first-time home buyers have been given the benefit of an additional deduction of Rs. 50000 on home loan interest for loans not exceeding Rs. 35 Lakh, where the value of the house is no more than Rs.50 Lakh. This will result in improved home buying sentiment in smaller cities with lower housing costs, such as Pune. An improvement in sentiment will also be seen in the cheaper far suburbs of the metros.

However, this deduction is not sufficient to increase the sentiment much for first-time home buyers in the central parts of the metros like Mumbai, where housing prices are exceedingly high and such an exemption makes little to no difference in the burden on home buyers.

The fact that the market indices took a nosedive immediately after the budget announcement more or less reflects the way sentiment in the housing sector has gone. However, if the RBI announces a cut in interest rates on the heels of the reduced fiscal deficit announced by the Finance Minister, it could be a day saver.

Architect Manoj Tatuskar – Glad to see some expected steps coming through the budget. Tax benefits for developers of residential unit up to 60 square meter was much needed to provide boost to affordable housing. Also additional exemption up to Rs.50000/- in interest amount will boost the sale the economical units in the city. We are hoping to see positive output of this policy in very short time. Exemption from service tax and excise duty will help in reducing housing rate and will activate the sale of homes.