Budget support for affordable housing increases
The fresh support to the affordable housing sector is a big plus for the realty sector in the budget this year, while other expectations of the sector have been left out of the budget proposals
For the real estate sector, the Union budget 2018 continues the central government’s support to the housing for all mission, and affordable housing.
Last year, several measures like the Credit Linked Subsidy Scheme (CLSS) and the reduction of GST (Goods and Services Tax) from12% to aneffective rate of 8% were weaved around the government support to the affordable housing.
“A similar trend is visible in this budget where the affordable housing fund under National Housing Bank (NHB) has been created as a part of the priority sector lending,” said Shishir Baijal, chairman and managing director, Knight Frank India.
The support to the affordable housing, “Would kick-start the real estate in Tier 1 and Tier 2 cit- ies along with new mushrooming areas in major cities as well. Increased investments and number of airports may boost Aerotro polis projects ,” said, Kushagr Ansal, president, CREDAI (Confederation of Real Estate Developers Association of India) Haryana. The ambit of the affordable housing has consistently widened, covering from smaller sized residential properties to the mid-sized properties, and incomes ranging from economic weaker sections, to an annual income of ₹18 lakh.
The budget also addressed the anomaly under Section 43 CA to tax real estate transactions at their real value rather than the value arrived at by applying artificially higher circle rates. “As per new announcement, if the circle rate does not exceed 5% of transaction value, no adjustment is required towards the capital gains on a real estate transaction. It will help in terms of some extra savings if there is parity between the market rates and the ready-reckoner rates. Cities which are not under the heavy influence of real estate investors and where prices are rational may benefit from this announcement,” said Anuj Puri, chairman, ANA ROCK Property Consultants.
Anotherpositive for the realty sector is budget offering greater parity between the sector and the equity markets with imposition of long term capital tax on the equities. “Re-introduction of long term capital gain tax in equities will make real estate a more attractive asset class compared to last year,” said, Prateek Mittal, chairman, Real Estate and Infrastructure North Indian Regional Council, Assocham (Associated Chambers of Commerce and Industry of India).
Increase in the number of tax- payers since last year is also positive development for the sector. “With the massive crack down on black money, the taxpayer base has increased significantly. This is, at least indirectly, good news for the real estate sector as seeking home loans is now going to be easy for a larger set of individuals,” said Puri.
However, there has been a silence in the budget on stimulating mainstream real estate demand. “The sector grappling with the reforms-driven new order has been bereft of any meaningful interventions that could have been achieved through the budget,” said Baijal.
The Union Budget 2018 catering largely to the rural and agricultural sector. “While the finance minister marginally incentivised the salaried class with a standard deduction of ₹40,000, with no other significant incentives/exemptions on the personal tax front there is not much change in the net disposable income. At the current juncture, the sector definitely required stronger measures to address some of the pertinent issues such as rationalisation of stamp duty, streamlining the approval process through single window clearance, according industry status to the sector etc to bring the sector on the path of recovery,” said, Neeraj Bansal, partner and head-building, construction and real estate, KPMG, India.
The overall expectations of the realty sector were high which have not been met. “This is likely to impact commercial as well as a residential sector in the country. Much to our disappointment, industry status and single window clearance system could have been the biggest game-changing reforms for real estate sector which were not even mentioned in the budget,” said Ansal