Statement on real estate sector perspective from Neeraj Bansal, Head of Real Estate and Construction sector, KPMG in India
Union Budget: A mixed bag for the real estate sector
The Union Budget 2016-17 was a mixed bag for the real estate sector. The targeted reforms in REITs/INvITs, Affordable Housing and additional tax benefits for 1st time home buyers are expected to support the growth in the real estate sector. However, the budget was silent on the some other key demands such as removal of Minimum Alternate Tax on Special Economic Zones; exemption of service tax to Joint Development Agreements and developers agreements; Clarification on taxation of JDAs; allowing developers to raise funds through External Commercial Borrowings (ECBs) etc.
The Dividend Distribution Tax on REITs and INvITs SPV was the main issue hampering the emergence of REITs in India. With removal of DDT on REITs SPV, the REITs structure of India is now at par with global regulations. REITs take-off is expected to improve liquidity situation in the real estate sector as it would ease exit for developers from completed properties.
The exemption of service tax on housing units of less than 60 sq. meters is a positive move for the development of affordable housing sector.
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