Budget 2017-18: Expectations around the Real Estate Sector

Commercially, in joint development projects, the landowner receives consideration partly in cash and partly in kind from the builder.

The ‘demonetisation’ drive of the Indian Government was designed to take the country towards a cashless economy. Given this drive and enactment of the Real Estate Regulation Act, 2016, the public (common man and investors alike) is waiting with bated breath for a fall in prices in the housing sector and the expectations from the annual budget of 2017-18 (Budget) are on the lines that prices in the housing sector would fall.

Commercially, in joint development projects, the landowner receives consideration partly in cash and partly in kind from the builder. More often than not, the consideration in kind is deferred until the completion of the project. This creates a cash crunch in the hands of the land-owner as he is taxed in the year of the transfer itself irrespective of completion or termination of the project. To avoid this hardship, land-owners wish for taxation to be linked with the receipt of consideration.

Income tax law provides for deduction of tax from the gross sale consideration made to a resident seller of an immovable property (under certain circumstances). There can be instances where the resident seller may have to claim this tax deducted as refund owing to the exemptions and deductions claimed by such seller. Currently, the mechanism of approaching the tax authorities to lower a tax deduction incidence by obtaining a certificate is not available in the instant case, albeit it is available for various other payments. It is expected that such mechanism would be extended to the real estate sector as well.

Given the high costs associated with purchasing a residential property in India, especially in metropolitan cities, one is hopeful that this Budget would increase the limits of claiming deductions relating to housing loans. This would give a much-needed impetus to the mobilization of funds towards the real estate sector.

Lastly, while Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (INVITs) were marketed as an attractive alternate form of investments in the real estate/ infrastructure sector, they have not been implemented commercially thus far. To align the tax regime with available structuring options and give a fillip to this alternative form of investment, the tax related relaxation which was extended to sponsors in case of transfer of shares of SPVs to business trusts should also be extended to transfer of real estate/ infrastructure assets.

Source: https://goo.gl/JFGSAB

PM to present post-note ban plan in New Year’s address

The government’s objective was to rid the economy and society of the menace of black money and the ills brought by it, he said. India was close to being “Swachh from all forms of filth”.

Brushing aside the opposition’s criticism, Modi said India’s 1.25 billion citizens welcomed the move, understood it and supported it even in the face of great personal difficulties.

Note ban had “a crippling impact on dangerous and highly damaging illegal activities, such as human trafficking, and the narcotics trade as well”, he said.

The Prime Minister took on the Congress which is leading the Opposition charge. “I pity some of our opponents, especially the Congress leadership, for the desperation they have been exhibiting. On the one hand, they say I took this decision for political dividends, and on the other, they say people have been troubled and are deeply unhappy. How can the two go together?”

Modi was also critical of Manmohan Singh who said demonetisation was “monumental mismanagement and organised loot”.

“It is interesting that the words monumental mismanagement come from a leader who has been at the helm of India’s economic journey for around 45 years -- from being the chief economic adviser to the DEA (department of economic affairs) secretary, RBI governor, planning commission deputy chairman, finance minister and prime minister -- all the while during which large sections of our society have continued to live in poverty and deprivation,” Modi said.

The Prime Minister also defended frequent changes in guidelines by seeking to make a distinction between niti (policy) and ran- niti ( strategy). The changes were made to stay ahead of the people trying to exploit the loopholes.

Following the November 8 announcement, the government and the Reserve Bank of India have changed the guidelines at least 60 times.

Source: https://goo.gl/iD39Z