No focus on realty in budget?
POST BUDGET The focus of the current budget has been on improving ease of living
The focus of Union Budget 2018-19 is on “healthcare, education and social security” in the words of the Finance Minister, Arun Jaitley. He clearly spelt the motivation of this year’s budget as ‘Ease of Living’ with continued push for affordable housing but there wasn’t much to cheer about for the real estate sector.
The real estate sector’s longpending demand of receiving “infrastructure” status and single window clearance for all real estate projects found no mention. Nor were the uniform stamp duty or reduction in GST rates considered. From home buyer’s perspective, additional relief on stamp duty and registration could have been reduced or merged with GST to expedite the decision of home buying.
There was sustained thrust for affordable housing after according it “infrastructure” status in Union Budget 2017-18, and reducing the GST from 12% to 8% bythe GSTcouncilasaprecursor to this year’s budget. There was an announcement on creation of Affordable Housing Fund under the National Housing Board - this will allow better access to capital for such developments in urban and semi-urban areas. As many as 51 lakh houses in rural areas are to be built in 2018-19. According to Bhairav Dalal, Partner - Real Estate Tax, PwC India “Affordable Housing continues to get preferential treatment towards achieving the vision of “Housing for all” by 2022. Creation of the Affordable Housing Fund will certainly ease the funding gap.”
Infrastructure was red hot as the Finance Minister proposed the redevelopment of over 600 railway stations, completion of 9,000 kms of highways, development of the suburban railway networks in Bangalore and Mumbai, as well as improvement of regional connectivity with UDAN expected to connect 56 unserved airports and 31 unserved helipads in the country. Anuj Puri, chairman Anarock property consultants lauded the regional air connectivity scheme to connect 56 unserved airports as “good news for business growth and office space demand in smaller cities, with a natural spinoff demand for housing on the back of job generation.”
With sizeable allocations to the rail and road sectors, the Budget clearly recognized the infrastructure sector as agrowth driver. According to Anshuman Magazine, CBRE – “Announcements in allocation for infrastructure and road and highway developments of over 9000 kilometers, airport development to increase capacity byfive times as well as 600 railway station developmentwill create opportunities for developments around these locations. Further government continues to focus on the ‘Bharatmala’ to develop 60,000 kilometers of roads further allows for development of new locations.”
Smart cities was on agenda as the budget laid emphasis on urban development by allocating Rs2lakhcrore towards the 99 shortlisted cities under the Smart Cities project, and improving urban infrastructure under AMRUT.
Industry insiders said that the real estate industry though not a direct beneficiary may gain ‘indirectly’, with vast investments in smart cities and infrastructure. According to Jaxay Shah, President, CREDAI National – “More than these direct measures, however, it is the deeper economic logic of the Budget which is the major boost for housing and real estate. The public investment in infrastructure in the rural areas, agricultural marketing, smart cities and urban connectivity, multiply investment prospects for real estate sector.”
However the biggest takeaway in Union Budget 2018-19 was for the healthcare sector with the idea of universal healthcare being introduced, with nothing special for real estate. According to Dr. Niranjan Hiranandani, National President Naredco– “The one thing that touched my heart more than my mind was the idea of going towards universal health coverage for 50 crore people. This was unprecedented and I am proud to see what the government is aspiring to do- a first in world history, not just Indian history.
However when we look at our very own real estate sector in connection with the Budget- I can only say “Oh my God, we have missed the bus.” Naredco had many expectations, says Hiranandani “especially because we have a target to achieve in a given time frame. But let’s distinguish between expectations and concerns which are sacrosanct which ‘at the minimum’ need to be addressed and I am stating only those here. One is that the real estate sector needs to be given an infrastructure status. Adequate concessions need to be given such as bring down GST to 6% across the board, all segments of housing, rather than apiecemeal concession to just affordable housing, at least till the time objective of PM “Housing for all 2022” is achieved. Today there is far greater incentive to invest in stock market versus real estate, as investment in the latter comes with the burden of all kinds of taxes.
The other point raised by Naredco was about circle rates. Says Hiranandani, “We feel that section about circle rate -where if you sell properties at a rate less than the circle or the ready reckoner rate, you are penalized for it - needs to bescrapped, doneaway with and thrown into the river, because it does not suit the buyer, the seller or the principal objective of rationalizing prices.” Besides, there is a concern about tax on vacant flat. “Currently if there is avacant flat, one is charged a tax as notional rent. How can the GoI promote the concept of creating surplus housing stock amongst developers with a section that conflicts with the objective of creating surpluses?”
Finally, it’s not required for everyone to invest into buying a house. In US more than 50% of the people stay on rent. There is an imperative need to promote rental housing.”
Curbing cryptocurrencies was also announced this Budget. Says Anuj Puri, “There was conjecture that cryptocurrencies would find their way into Indian real estate, as it has in developed countries, effectively becoming the ‘new black money’ in the sector. With the Government committed to taking all necessary steps to eliminate the use of cryptocurrencies in India, people who were looking at them as a get-rich-quick route will have to look at traditional asset classes and investment routes again.
Overall, industry insiders felt that the demand and supply dynamicsof real estate sector got no fillip.
“There has been a silence in the budget on stimulating mainstream real estate demand,” says Shishir Baijal, managing director, Knight Frank India“The sector grappling with the reforms-driven new order has been bereft of any meaningful interventions that could have been achieved through the budget.”
There was expectation of relaxation in tax rates. According to Ramesh Nair, country head, JLL India – “The sector which has been reeling under pressure post the functional reforms of RERA, Benami Properties (Prevention) Act, Bankruptcy and Insolvency, was expecting some big ticket announcements to revive it. The sector expected to see some measures to infuse demand with relaxations in key tax rates like 80C, 80CC and 24B which have not been addressed.”
To summarise, the budget was, as Anuj Puri describes, balanced but not a boon for the real estate sector.
WITH SIZEABLE ALLOCATIONS TO THE RAIL AND ROAD SECTORS, THE BUDGET RECOGNIZES INFRASTRUCTURE AS A GROWTH DRIVER
The sector’s longpending demand for a single window clearance for all projects found no mention in the budget