The realty sector has much to cheer about from the Union budget in which Finance Minister Arun Jaitley has removed the last significant tax hurdle in the way of Real Estate Investment Trusts (REIT), and gave incentives to first-time home buyers and tried to make affordable housing more viable.
The budget left out REITs from the purview of dividend distribution tax (DDT). Another proposal to stimulate housing activity is to facilitate investments in Real Estate Investment Trusts. Any distribution made out of income of special purpose vehicle to the REITs and Infrastructure Investment Trusts will not be subjected to Dividend Distribution Tax.
The biggest beneficiaries of REITs would be companies with large rent generating commercial office portfolios, such as DLF Ltd, Blackstone Group, K. Raheja Corp and RMZ Corp.
To fuel housing activity under the Pradhan Mantri Awas Yojna, through which the government has been trying to address the housing needs of the poor, Jaitley has proposed to give 100% deduction for profits to an undertaking from a housing project for flats up to 30sq.m. in four metro cities and 60sq.m. in other cities, approved between June 2016 and March 2019, and completed within three years of the approval.
For the first-time home buyers, the budget proposed deduction for additional interest of Rs.50,000 per annum for loans up to Rs.3.5 million sanctioned during the next financial year, provided the value of the house does not exceed Rs.50 million.