#UnionBudget2016: Encouraging start-ups can proliferate mixed-use properties

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Budget 2016-17

Industry experts believe that the central government’s focus on start-up ecosystem can lead to more job creation and growth of commercial sector.

Last month, Prime Minister Narendra Modi introduced the ‘Start-Up India’ mission aimed at promoting and nourishing the start-up ecosystem in India. He had also announced that the government will bring-in more reforms in order to encourage growth in the segment.

Modi’s announcements were quite visible in the Finance Minister’s third budget speech on 29th February 2016. Various sops were announced to encourage setting up of start-ups. The real estate industry has hailed this move saying that it will spark a new energy in the start-up segment which can lead to growth in the commercial sector and subsequently in the residential sector as well.

Commenting on the move Surabhi Arora- Senior Associate Director, Research at Colliers India said, “The overall budget intent is to create a conducive environment for economic growth by providing impetus to newer businesses. The government has started various initiatives like Make in India, Start-Up India, improvement in ease of doing business, skill development programmes, etc. The focus on infrastructure will also provide much needed boost to all the industries. All these initiatives will create more jobs in the economy and lead to a revival in demand for real estate industry. However, it will only have a long-term impact and there would be only a miniscule impact on the commercial absorption”

“Encouraging start-ups can shape the commercial sector of India as it will help in employment generation besides bolstering the rupee value.  Easing of entry barriers for the launch of start-up businesses will drive innovation, entrepreneurship and positively impact the industry. This move is especially good for the manufacturing sector as a five per cent deduction in taxes will help funds to be diverted to other capital expenses,” added Shrinivas Rao, CEO-APAC, Vestian.

Anuj Puri, Chairman & Country Head, JLL believes that encouraging start-ups can open a new avenue in commercial sector. He says, “In the recent past, we have seen successful start-ups (particularly in the technology and e-commerce sectors) becoming big and occupying a commendable share in office space. As more start-ups get encouraged to commence operations, we expect developers to offer more small mixed-use properties or arrangements for sharing of office space to cater to this segment.”

Sops announced for start-ups in the Union Budget 2016-17:

  • A 100 percent tax deduction for three out of five years set up during April 2016 and March 2019. MAT will apply in such cases.
  • Capital gains will not be taxed on the invested sum in regulated/notified funds and by individuals in notified start-ups, in which they hold majority share.
  • Lowering of the corporate income tax rate for the next financial year of relatively small enterprises i.e. companies with turnover not exceeding Rs 5 crore (in the financial year ending March 2015), to 29 per cent plus surcharge and cess.
  • To remove the difficulties and impediments to ease of doing business, government will introduce a bill to amend the Companies Act, 2013 in the current Budget Session of the Parliament. The Bill would also improve the enabling environment for start-ups. The registration of companies will also be done in one day.

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