The Union Budget 2017-18 is already poised to be quite a trailblazer. First, by moving the Budget announcement to February instead of the traditional March, secondly by eliminating the difference between Plan and Non-Plan expenditure and finally by integrating the Railway Budget with it. Going by the trend, a lot is being expected from the Budget that would move away from convention and bring in some much needed financial consolidation to the economy, businesses, policy and the common man. There is also a reflection of the urgency to improve the investment climate of the economy in the wake of demonetisation and for the stepping up of demand, particularly investment demand.
Budget and real estate
Looking at the real estate perspective, optimism is ruling the roost. With the central government gung ho about accelerating the housing sector, the real estate sector is finally getting the much needed attention. Most of the stakeholders are now hoping this translates into positive policy implementation. This, especially in the context of the prime minister's mandate on Housing For All and the highly talked about RERA, calls for a considerable stimulus from the government to enable and sustain the realty sector.
Budget and the homeowner
The recent interest subvention announced by Prime Minister Narendra Modi, of 4 percent on home loans up to Rs 9 lakh and 3 percent on loans up to 12 lakh, has established the government’s recognition of the sector in terms of its welfare and growth potential. This is in the same vein as the 2016-17 Budget where additional deduction was given on interest for loans of Rs 35 lakh or lesser, provided the value of the house did not exceed Rs 50 Lakh. Taking this forward, we now hope that the range of the loan be increased to Rs 40 lakh and the amount of interest exemption be increased to Rs 2 Lakh from the existing Rs 50,000. The Section 43Ca, which has provision for taxation in case sale values are less than ready reckoner rates, as well as the Section 194, which calls for a 1 percent TDS on properties above Rs 50 lakh, should also be removed. As the market has rationalised, post demonetisation there is no need for such provisions which are grossly unfair to the buyer.
Finance and real estate
If implemented, these changes will help propagate and provide the right impetus to banks and other financial institutions to facilitate a low interest regime, in line with the objective Finance Minister Arun Jaitley had set in 2016. Further clarity and support through the GST, in terms of exemption for affordable housing and softer rates for the other segments and a lowering of long-term capital gains tax on property will further boost the movement of funds into the sector. This will help create the much craved capital that the sector is short of and help the supply of housing match the demand, a gap which presently stands at almost 20 million housing units.
Housing as infrastructure
A key element to be considered when discussing the Budget expectations is the infrastructure aspect. Housing projects contain provisions for roads, electricity sewerage and other institutional uses which form the infrastructure of an area. They are central to the growth of the country and are integral to every individual citizen’s basic need. It stands to reason, therefore, that affordable housing projects be given the status of infrastructure to enable them to access institutional finances. This would lend support to the sector and allow affordable housing to grow without hindrances, making it the core driving segment of the sector. This will enable the sector to focus on every segment catering to various income groups.
The budget provides the perfect opportunity for the government to create a supportive, inclusive and growth-oriented ecosystem for the real estate sector and all its stakeholders. It is imperative that incentives be provided not just for end-users but for institutional and individual investors as well to transform real estate into a viable investment asset. With the onset of newer investment instruments such as REITs, the sector needs the support of the invisible hand of the government to guide it towards a long lasting period of development.
(The author is president, Confederation of Real Estate Developers Association of India)
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Updated Date: Jan 31, 2017 11:54 AM