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mains Test Series 2018
Q. Budget and real estate: Discuss and analyse the initiatives budget 2017 with respect real estate sector.
Feb 11, 2017 Related to : GS paper-3

Ans :

Introduction-

Central government in budget 2017 has proposed several measures to rationalise tax and boost transparency in the real estate sector. In a recent time government taken various measures and initiatives included introduction of Real Estate Act, Goods and Services Tax, Benami Transactions, Relaxation of FDI norms, tax breaks for affordable housing, launch of Smart Cities and Housing for All programme, etc. 

Key initiatives in budget 2017-

  • Infrastructure status has been given to Affordable Housing to boost for affordable residential sector.
  • 10 million homes to be built by 2019 for the homeless and those living in kutcha houses.
  • Holding period for immovable assets reduced from 3 years to 2 years and indexation to be shifted from 1981 to 2001.
  • Tax breather for notional rent income on unsold unoccupied completed projects.
  • National Housing Bank (NHB) will refinance individual housing loans of about INR200 billion in 2017-18.
  • Government has increased the investment in infrastructure and development projects.

Analysis-

  • In mature markets the real estate accounts for almost half the GDP growth, but in India the real estate sector is much smaller. Hence there is much potential for growth in the sector.
  • The Budget 2017 seeks to shift the indexation base year from 1981 to 2001 for the levy of capital gains tax on land and real estate, which was long overdue. 
  • Infrastructure status for affordable housing and its broader categorisation are both moves in the right direction of reform. 
  • Removal of the tax on notional rental income for one year, from the date of issue of completion certificate, would allow real estate developers to liquidate inventory and avoid additional tax burden.
  • Similarly budget has proposed various important measures like the increased quantum of refinance for real estate, the move to extend the period for external commercial borrowings for housing at reduced rates etc. 
  • These measures are intended to enhance real estate sector, as India’s real estate sector has very small role in overall GDP growth in comparison to other mature markets.

Conclusion-

The government has proposed various initiatives to promote real estate sector. As Indian real sector is yet to develop on par with developed world. There exists huge potential in this sector, hence the government should implement the proposed policies to get desired results.


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