Sobha Limited’s reaction to the Union Budget 2017-18

Mr. J.C. Sharma, Vice Chairman & Managing Director, Sobha Limited.

Bengaluru, Wednesday, 1st February 2017: The Union Budget announced today is a pro-growth budget and a step in the right direction. We, at Sobha, welcome it whole heartedly. The focus on affordable housing is laudable, as it has been accorded the infrastructure status which will have many ripple effects.

Government’s proposal to take into consideration the carpet area of 30 and 60 sq. metres instead of built-up area of 30 and 60 sq. metres (as was the case earlier) of the houses is a welcome step, whereby 30 sq. metres limit will apply only in case of municipal limits of 4 metropolitan cities, while for the rest of country, including the peripheral areas of metros, limit of 60 sq. metres will apply. This will allow developers to plan their future projects within the 60 sq. metre carpet area, which will boost the housing sector immensely.

Additionally, the Finance Minister’s proposal to extend the completion period of building of houses from the present 3 years to 5 years is logical and commonsensical.

The reduction of the holding period for considering gain from immovable property to be long term from the present 3 years to 2 years and the base year for indexation to be shifted from 1.4.1981 to 1.4.2001 for all classes of assets, including immovable property is another forward looking step.  This will help reduce capital gains liability and encourage mobility of assets. 

In case ofjoint development agreements signed for development of property, the liabilityto pay capital gain tax will arise in the year the project is completed. Landlordsnow need not fear that they will be required to pay their taxes at the time ofthe transfer of land, rather it will be required at the time of the completionof the project. Further, after completion of the project, developers can selltheir unsold inventory within 1 year, post completion of the project withoutbeing subjected to any income tax liability. This will give the much neededbreathing time to the developer community for liquidating the inventory.

Thereduction of the rate of taxation from the existing 10% to 5 % for individualassesses between income of INR 2.5 lakh to INR 5 lakh will help reduce taxliability of all persons below INR 5 lakh income either to zero (with rebate)or 50% of their existing liability. While the taxation liability of people withincome up to INR 5 lakh is being reduced to half, all the other categories oftaxpayers in the subsequent slabs will also get a uniform benefit of INR 12,500per person. In case of double income families, i.e. up to INR 10 lakh incomeannually, there will be multiple savings as indicated above, which can beinvested in buying an affordable home easily. This will help fulfil the PrimeMinister’s ambition of “housing for all”, thus fuelling the demand foraffordable housing.

Furthermore,the proposal to reduce income tax from 30 to 25 % for smaller companies withannual turnover up to INR 50 crore, in order to make MSME companies more viableand also to encourage firms to migrate to company format is a very progressivestep, as it will make our MSME sector more competitive in comparison to largercompanies. This, in effect, will give some extra savings in the hands of themicro, small and medium entrepreneurs for them to invest back either into theirbusinesses or buy real estate as a safe investment.

Overall, theabove proposed budget measures as announced today will help revive the realestate sector. This will augur well for both, the consumers and developersalike.

N.B: Theabove matter is to be alluded to Mr. J.C. Sharma, Vice Chairman & ManagingDirector, Sobha Limited.

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