NDA government announced a slide of measures to impel the real estate sector, and an allocation of Rs 7,060 crore for the development of 100 smart cities, a downsize in the size of project eligible for FDI from 50,000 sq.mtr to 20,000 sqm and bisecting the minimum investment for FDI to $5 million.
Declaring his budget plan,Finance minister Arun Jaitley said he has also allotted Rs 4,000 crore for affordable housing for the urban poor through the National Housing Bank (NHB) and plan to widen incentives for housing loans. And Slum development has been the part of CSR activities. Moreover, the government will also offer the essential incentives for Real Estate investment trust (REITS) and it will have a pass through for the purposes of taxation in effect avoiding double taxation ,Mr Jaitley added.
Giving a perfect path to the new government and PM Narendra Modi’s plan of constructing smart cities across the country, Jaitley allotted Rs. 7,060 crore in the budget for increasing 100 smart cities, redeveloping satellite towns of foremost cities as well as smaller cities.
Getambar Anand, managing director of ATS infrastructure and also the president of the confederation of Real Estate Developers Association of India (Credia) added, ‘the opening up of FDI will bring in opportunities for cheaper capital for smaller projects as well as improvise the quality and delivery of low cost and affordable housing projects.
Besides this, there are umpteen projects which are not eligible for foreign direct investment because they do not meet the minimum threshold conditions. That further means, Only the big projects which have a higher price range, are only able to attract attention from foreign private equity funds.
Housing Ministry, added, there is a scarcity of around 18.78 million houses in the country of which 96% is in the economically weaker and low income segment. And this move to loosen up FDI limit which will aid in increase the development of low cost and affordable housing.
‘Relaxation of FDI limit in real estate development under the automatic route is a clear way for inviting investments and calm down of limit for minimum investment is an invitation to small players and even boost NRI Real Estate Investment’ , added by Amit Bhagat, managing director of Ask Property investment Advisors, which pump in the money in residential projects.
Furthermore, ’ The drop in built-up area and range of projects will allow mid-sized and not that renowned builder, but with a good reputation, have better access to FDI anlocated in sectord even boost up affordable housing in the country’, said by Surbhi Arora associate director, research at property advisory firm Colliers International.
REITS are also expected to offer succor to numerous liquidity starved real estate companies that presently has a sky-scraping level of debt on their books. Despite the guidelines were introduced earlier by SEBI, and what was missing was the clearness on taxation for the structure because of which the company has not yet taken a call on it.
“The pass-through taxation status or REITs should eliminate one fat roadblock. The access to capital market combined with favorable demand scenario should modify the cash-starved commercial real estate segment”, said Srivasttava, chairman of General property advisers.
A REIT is a type of safety that is sold like a stock on an exchange & invests, owns real estate assets that turn out a stable rental income for shareholders. The arrival of REITs will give builders a chance to monetize their income producing assets.
Moreover, companies like Unitech , DLF, Embassy Group and funds such Xander, Blackstone have several income-producing assets that can ne listed as REITs. '”And this will also offer exit opportunities to developers releasing up capital for Greenfield project, said Sunil Jain” , partner at law firm J Sagar Associates.
And “This will aid in easing liquidity necessity for developers, paving way to raise trouble-free capital and also offer access to retail investors to benefit from regular income and appreciation benefits from real estate” , added by Neeraj Bansal, partner and head, real estate & construction at consultancy firm KPMG.
