Announcing his Budget proposals, finance minister Arun Jaitley said he has also
allocated Rs 4,000 crore to affordable housing for the urban poor through the National
Housing Bank (NHB) and plans to extend incentives for
housing loans. Slum development
has been made part of corporate CSR activities. The government will also provide
the necessary incentives for real estate investment trusts (REITS) which will have
a pass-through for the purposes of taxation in effect avoiding double taxation,
Mr Jaitley said. Giving a definitive direction to the new government and PM Narendra
Modi's plan of building smart cities across the country, Jaitley allocated Rs 7,060
crore in the budget for developing 100 smart cities, redeveloping satellite towns
of major cities as well as other smaller cities.
"The opening up of
FDI will bring in opportunities
for cheaper capital for smaller projects as well, improving quality and delivery
of
low cost and affordable housing projects," said Getambar Anand, managing director
of ATS Infrastructure and also the president of the Confederation of Real Estate
Developers Association of India (Credai). At the moment a large number of projects
are not eligible for
foreign direct investment because they do not fulfil the minimum
threshold conditions.
This has meant only big projects, usually on the higher side of the price range,
are able to attract attention from foreign private equity funds. Since its election
to office, the government has articulated its vision to provide housing for all
by 2022 for which it wants to partner with the private sector. According to the
housing ministry, there is a shortage of around 18.78 million houses in the country
of which 96% is in the economically weaker and low income segments. This move to
relax FDI limit will help increase the development of low-cost and affordable housing
furthering the government's vision.
"Relaxation of FDI limit in real estate development under the automatic route is
a clear road map for inviting investments. Relaxation of limit for minimum investment
is an invitation to small players and increased NRI investment," said Amit Bhagat,
managing director of Ask Property Investment Advisors, which invests in residential
projects. "The reduction in built-up area and size of projects will allow mid-sized
and smaller developers with good track records better access to
FDI and boost affordable housing in the country," said Surbhi Arora associate
director, research at property advisory firm Colliers International. REITS too are
expected to provide succor to several liquidity starved real estate companies that
currently have a high level of debt on their books. While the guidelines for REITS
were introduced earlier by SEBI, what was missing was the clarity on taxation for
the structure because of which not company has yet taken a call on it.
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