The third budget under the NDA government was delivered amidst much anticipation.While it received a tepid response from individuals and corporate sectors, the weaker sections of the society and rural India have quite a lot to cheer about.
The focus of the budget was affordable housing and several reforms rolled out in the budget were in that direction. Under Section 80-IBA, 100% deduction for profits to developers has been proposed for constructing flats of up to 30 sq m in Chennai, Delhi, Kolkata or Mumbai and 60 sq m in other cities, approved during June 2016 to March 2019 and completed in three years. MAT will still be applicable.
The supply of flats of sizes of up to 30 sq m in Chennai, Delhi, Kolkata or Mumbai comprises only approximately 9,000 units, led by the Mumbai Metropolitan Region and the National Capital Region, while the supply of flats of up to 60 sq m in 23 cities in India except the above includes 1,63,722 units in all and constitutes only 25% of their total supply.
Thus, this reform is not likely to have a far-reaching impact. However, Pune is likely to benefit from the service tax exemption of houses of up to 60 sq m since the demand for 1BHK and compact 2BHK units is the highest in this city.
On the other hand, developers in Kolkata will not benefit much from the reform underlying 100% deduction on profit for flats of up to 30 sq m, as the migrant population in the city is very less and there is muted demand for compact 1BHK and studio apartments.
The author is founder and MD,Liases Foras Real Estate Ratings and Research Pvt Ltd