The Budget aims at synergising investments in railways, roads, waterways and civil aviation. He has set a target of commissioning 3,500 km of railway lines in FY 2017-18.
The Finance Minister (FM), who was entrusted with presenting India's maiden combined Budget, seems to have met expectations for the infrastructure and especially the real estate sector.
The Budget aims at synergising investments in railways, roads, waterways and civil aviation. He has set a target of commissioning 3,500 km of railway lines in FY 2017-18. He has also announced the proposed enactment of a Metro Rail Act to facilitate private investment in construction and operation of metro railways.
Roads continue to be a priority with additional 2,000 km of coastal connectivity roads identified for construction. A specific programme for multi-modal logistics parks and transport facilities is proposed to be implemented. Select airports in Tier 2 cities under the PPP mode for operation and maintenance are to be taken up.
For the real estate (RE) sector, the budget proposals seem to have exceeded the industry expectations. The FM has accorded infrastructure status to affordable housing which has been a long standing demand of the industry. This should result in availability of cost effective funding for such projects. There are also several income tax proposals which would benefit the sector.
The existing profit-linked income-tax exemption scheme for developers of affordable housing projects has been liberalised. The carpet area has been susbstituted in place of built up area to determine the maximum area for eligibility and extending the time frame for completion of projects from 3 to 5 years.
With a view to incentivising investment in RE sector and encouraging mobility of assets, the FM has proposed to reduce the holding period of immovable property from 3 to 2 years for the gains to be considered long term in nature. Another significant step by the FM is bringing clarity on taxation for land owners in the case of joint development agreements.
While the proposals provide positive sentiments, it will be critical for the government to ensure that the infrastructure and the real estate sectors, which provide multiplier effects to the GDP, start pulling their weight.
(Avinash Narvekar, Tax Partner, EY India)
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