Mumbai: The government’s decision to reduce corporate tax base rate to 22% is expected to provide real estate developers a buffer to offer further incentives and cut prices of residential, particularly luxury, property projects to spur demand. The move is also expected to bolster growth of other key segments, including offices, warehousing and industrial real estate, said experts.

“The cut in corporate tax, as announced by the government, possibly gives developers an opportunity to marginally reduce prices of properties as and where they can, which will eventually boost sales for them during the upcoming festive season,” said Anuj Puri, chairman, ANAROCK Property Consultants.

The residential real estate sector has been grappling with sluggish demand that has resulted in inventory pile-up and developers have already been offering incentives and various schemes to attract buyers. Puri said that by sweetening the deal for prospective homebuyers, developers will be able to liquidate their unsold stock and thus reduce inventory.


In a bid to accelerate economic growth, the government has announced a series of measures over the past few weeks. In a key measure, it announced a Rs 20,000-crore fund to provide last-mile financing for stalled housing projects.

The corporate tax rationalisation is expected to boost both investment and consumption.

“The reduction in corporate tax will incentivise corporates to pump up investments. This will provide more surpluses to corporates including real estate developers to use the same for prompting customers to act and generate more demand,” said Niranjan Hiranandani, president, National Real Estate Development Council.

However, further incentives or price rationalisation is unlikely to materialise across markets and segments since the locations and projects that are already performing relatively better would not move in that direction.

“While affordable and mid-income housing are unlikely to see any reduction, luxury segment can see some reduction to attract homebuyers,” said Jaxay Shah, national chairman of the Confederation of Real Estate Developers Association of India (CREDAI).

“However, this can be a micro-market specific decision that developers will have to take based on their inventory, need for liquidity, project phase and response to the project so far.”

Meanwhile, representatives of CREDAI, in meetings held late Thursday with senior officials of the ministries of finance, and housing and urban affairs, sought further intervention of the government to resolve the ongoing liquidity and other issues affecting the sector.

The government’s decision to reduce minimum alternate tax (MAT) to 15% from 18.5% is expected to help special economic zone developers by pushing demand in key sectors, including commercial and logistics, and warehousing. Experts said the move is expected to push the manufacturing ecosystem to generate jobs and create wealth. This, in turn, is likely to propel office space and warehousing demand, they said.


READ  Pot stocks: Wall Street's latest vice


Please enter your comment!
Please enter your name here