Realtors hope tax cut will boost demand for residential properties

Demand for residential properties will get a boost after the cut in corporation taxes, said top property developers and consultants.

"Capital investment, which had stopped, will restart," said Niranjan Hiranandani, chairman at Hiranandani Communities. "When developers invest money, they will invest on new projects, which in turn generate employment. People will buy properties. There will be a multiplier effect." There was, however, "no room" to cut prices to boost demand, he added. 

Hiranandani said according to income tax rules, if a developer cuts prices by 5 per cent both the buyer and the seller have to pay a tax. 

With high prices and slow demand, residential real estate inventory has piled up massively. According to estimates, there is a ready residential inventory worth as much as Rs 90,000 crore.

Rajiv Talwar, chief executive at DLF, the country's largest listed property developer, said when there is more money in the hands of corporate entities and people, it will makes a difference.

"The economic progress will benefit real estate in the form of increased demand. We need to boost the supply of properties to meet the demand," Talwar said.

The reduction in the minimum alternate tax (MAT) to 15 per cent from the existing 18.5 per cent for companies which do not opt for a concessional tax regime will help affordable housing and developers of special economic zones, said Ramesh Nair, chief executive officer at JLL.

"The MAT provisions are applicable to the profits of housing projects eligible for deduction under the clauses of Section 80-IBA, which grants a 100 per cent exemption on profits from affordable housing projects," he said.