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Corporate tax rate cut to spur demand for warehousing, commercial real estate

It would specifically support developers operating in special economic zones, realty experts said.

Vandana Ramnani @vandanaramnani1
Representative image
Representative image

With the government slashing corporate tax rate to 25.17 per cent, real estate experts said that the move is expected to have a positive impact on the sector and is likely to push demand for warehousing and commercial real estate.

Realty experts said that reduction in corporate taxes is expected to bolster growth of industrial real estate development in the country and is likely to promote affordable housing.

It would specifically support developers operating in special economic zones (SEZ). The real estate sector has been demanding the removal of MAT for SEZ developers, they said.

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"The surplus funds available to companies will be invested in capex and talent. The NBFC sector will save between Rs 250 - 300 crore that can potentially be redeployed as loans. In a climate of global slowdown, this reform will make India an attractive destination for FIIs and long term investors. The announcement has brought parity to India's corporate tax rate compared to that of advanced markets thus making it very competitive," said Ajay Piramal, Chairman, Piramal Group.

Also Read: PM Modi lauds 'historic' corporate tax cut, says it will give 'great stimulus' to Make in India

It is a milestone effort towards kick starting the Indian economy and boost production. This substantial direct tax reduction will allow more liquidity for the corporates that are currently assuming drastic measures to protect their profitability, said experts.

"These measures will complement the monetary policy measures taken by the RBI in increasing liquidity and consumer spending. As a trickle - down effect of this, we should be hoping for a revival for the real estate sector as well. This boost will certainly accelerate demand for commercial spaces, but we understand that the financial stability expected will propel growth for the beleaguered residential market in the near future," said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

"The announcements made by the finance minister will go a long way in not just bolstering all-round sentiments but also see its positive ripple impact across all sectors including the real estate. As and when the overall financial health of the economy improves with these slew of measures, there will be heightened activity within real estate – by both actual home buyers and investors alike," said Anuj Puri, Chairman – ANAROCK Property Consultants.

Also Read | Deepak Parekh on corporate tax cut: 'It is a great boon'

The decision towards enhanced surcharge of funds not applicable to capital gains including derivates FPI’s is seen as a bold step by the government. This move shall invite investments in capital markets by FII, said Parth Mehta, Managing Director, Paradigm Realty.

The move is expected to push demand for warehousing and commercial real estate space.

"The lower tax rates, shows the government's commitment towards reigniting the economy's growth engines and augurs well for the broad economy as well as entrepreneurs. Further, the boost to the manufacturing ecosystem will not only generate jobs and lead to wealth creation but will also have cascading impact on other sectors including real estate and is likely to push demand for warehousing and commercial real estate space," says Anshuman Magazine, Chairman and CEO, India, South East Asia, Middle East and Africa, CBRE.

This move is also likely to help the real estate sector and specifically promote affordable housing.

The reduction in Minimum Alternate Tax (MAT) to 15 percent from the existing 18.5 percent for companies which do not opt for the concessional tax regime will act as a harbinger of growth. However, there will no MAT applicable for units which will opt for new concessional tax regime. This definitely is a welcome move, said experts.

This is likely to help the real estate sector and specifically promote affordable housing. The new proposal will also help in promoting the affordable housing segment. MAT provisions are applicable to the profits of the housing projects eligible for deduction under the clauses of Section 80-IBA. Section 80-IBA grants 100% exemption on profits from affordable housing projects, subject to conditions.

The measure is expected to bolster growth of industrial real estate development in the country. This is likely to help the real estate sector and specifically promote affordable housing, said said Ramesh Nair, CEO & Country Head – India, JLL.

This would specifically support developers operating in special economic zones (SEZ). The real estate sector has been demanding the removal of MAT for SEZ developers. SEZs and their development are keys to the growth of the office segment, logistics and warehousing and manufacturing sectors in the country. Their development has in turn contributed significantly to the overall growth of the neighbouring regions and propelled the housing sector, said Nair.

Jaxay Shah, Chairman, Credai National, said that the cumulative effect of quick succession reform measures including RERA, GST, NPA recognition and IBC contributed to the malaise in the real estate industry.

vandana.ramnani@nw18.com

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First Published on Sep 20, 2019 06:50 pm
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