India’s growth-oriented budget dithers on real estate sector

V Nagarajan

India’s penultimate budget 2023-24 has focused on balanced growth with fiscal sops to propel the country to $5 trillion economy by 2025. The capex outlay of Rs10 lakh crore is thrice than what was allocated in 2019-20. This will insulate India against global headwinds should a situation arises for the slowdown. The new manufacturing investment announced is five times over those announced in FY 2019-20. The credit guarantee scheme to MSMEs will generate Rs 2 lakh crore credit to this segment.

The finance minister has delicately balanced growth even while offering fiscal sops and avoiding moves in an uncertain global economic prospects. On the housing front, not much has been done to give a boost to the sector still awaiting an industry status after decades of dithering by previous regimes.

Affordable housing sector continues to get a big leap in that there is 66% rise to over Rs 79,000 crore in the allocation for PMAY scheme to bridge the demand supply gap. This will help the sector to continue to get the much needed capital flow under the Credit Linked Subsidy Scheme (CLSS) and other related schemes. The real scenario is that affordable housing launches halved by half due to spurt in raw material prices, labour and other factors.

On the logistics front, 100 critical transport infrastructure projects, for last and first mile connectivity for ports, coal, steel, fertiliser, and food grains sectors have been identified. They will be taken up on priority with investment of Rs 75,000 crore, including Rs 15,000 crore from private sources.

Indian states and cities will be encouraged to undertake urban planning reforms and actions to transform them into ‘sustainable cities of tomorrow’.

Through property tax governance reforms and ring-fencing user charges on urban infrastructure, cities will be incentivized to improve their credit worthiness for municipal bonds. An Urban Infrastructure Development Fund (UIDF) will be established and managed by the National Housing Bank. A sum of Rs 10,000 crore per annum will be made available for this purpose.

For better targeting of tax concessions and exemptions, a cap reduction of Rs 10 crore has been announced under sections 54 and 54F from capital gains on investment in residential house. It is proposed to amend provisions for computing capital gains in case of joint development of property to include the amount received through cheque etc. as consideration.

While interest paid on borrowed capital for acquiring or improving a property can, subject to certain conditions, be claimed as deduction from income, it can also be included in the cost of acquisition or improvement on transfer, thereby reducing capital gains. It is proposed to provide that the cost of acquisition or improvement shall not include the amount of interest claimed earlier as deduction.

In order to ease compliance and to promote non-cash transactions, it is proposed to increase the threshold limits for presumptive scheme of taxation for eligible businesses from Rs2 crore to Rs 3 crore and for specified professions from Rs 50 lakh to Rs 75 lakh. The increased limit will apply only in case the amount or aggregate of the amounts received during the year, in cash, does not exceed five per cent of the total gross receipts/turnover.

The current urban housing shortage has been reported at 10 million units and additional 25 million units of affordable housing will be required by 2030 to meet the growth in the country’s urban population. It is said that about 3 houses are built per 1,000 people per year compared with the required construction rate of five houses per 1,000 population, according to ET data.

As a PIO, I have established business in India but wish to raise short-term funds by leveraging the property invested in India to authorised dealer by way of mortgage. Is any clearance required for mortgage of property in India? Santosh Rane, Dubai.

No. A person resident outside India who has established in India in accordance with FEMA regulations for carrying on any activity, excluding a liaison office, may transfer by way of mortgage to an authorised dealer as a security for any borrowing, the immovable property acquired in pursuance of rule 26(a).

Can FDI invest in LLP? Similarly how do we remit in the event of disinvestment proceeds for investment made in LLP? Pranam Sudhir, Sharjah.

Payment can be made by way of an inward remittance through banking channels or out of funds held in NRE or FCNR (B) account maintained in accordance with the Foreign Exchange Management (Deposit) Regualtions, 2016. The disinvestment proceeds may be remitted outside India or may be credited to NRE or FCNR (B) account of the person concerned.