With the aim of fulfilling Union government's objective of 'Housing for all by 2022', Finance Minister Nirmala Sitharaman's first-ever Union budget has provisions for home owners, home loan owners, tenants and even real estate developers. Even if the latter isn't too thrilled.
Home loan holders get to enjoy more tax savings this financial year, with an additional tax deduction of Rs 1.5 lakh on loans taken till March 31, over and above the existing Rs 2 lakh in respect to self-occupied property. This means a person could enjoy up to Rs 3.5 lakh tax deduction on home loans, which translates into a benefit of around Rs 7 lakh over a loan period of 15 years, according to the minister.
There is a caveat, though—this is applicable only on loans for affordable houses, valued at or below Rs 45 lakh.
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This is in addition to the tax holiday already applicable on profits earned by developers of affordable housing. Obviously, affordable housing is the mantra, as the government plans to shower incentives on both middle class citizens ready to put their savings to spur the presently depressed real estate sector, as much as realty developers who are ready to invest.
The Centre will also move regulatory controls of the housing sector to the RBI from the National Housing Bank. The move has been welcomed by real estate players, who feel that this move, along with the recently implemented Real Estate Regulation Act (RERA) could go a long way in sorting out issues related to this sector in a faster, and transparent way. “Placing housing finance companies under the ambit of the RBI and incentives such as credit guarantees for NBFCs will provide a relief to this sector,” said Anshuman Magazine, chairman & CEO (India, Southeast Asia, Middle East & Africa), of real estate consultancy CBRE.
There are even incentives for those looking to rent property, with the government promising reforms with a new tenancy law. "Current rental laws are archaic and do not address the relationship between the lessor and the lessee realistically and fairly," Sitharaman said. She did not give any specifics on this, only saying this would be finalised and circulated soon. The aim seems to be to spur the presently highly unorganised rental market which is being eyed at by tech start-ups and other real estate start-ups who are hoping to work out models of co-living as well as corporatised rental models, sort of similar to the Air bnb model.
Though disappointed that their demands of being accorded 'industry status' was ignored, realty firms could take solace in the fact that the government's general accent on infrastructure spending—Rs 100 lakh crore over the next five years is one figure that was bandied about—augurs well. Sitharaman also specifically spoke about large public infrastructure to be built on government-owned land. That could be a windfall for realty ancillaries like construction firms and ancillary industries. This, coupled with the focus on the Pradhan Mantri Awas Yojana, which has earmarked 1.95 crore homes to be built in rural areas, and 81 lakh homes to be built in urban areas in the next 3-4 years, promises major activity in the real estate market in the days to come.
“To bring back growth, we expected industry status to this sector which would have helped developers cut capital costs and single window clearance, which has been a long pending demand,” says Surendra Hiranandani, founder and director of real estate company House of Hiranandani. “There was significant expectation to cut GST rates to a single rate, and not have multiple rates or taxes. The abolition of stamp duty or its incorporation under GST would have been an added advantage. [Lowering] interest rates would have helped resolve the existing liquidity crisis and boost housing demand,” he added.
Not everyone is despondent. “While it may seem like that there haven't been any direct announcements to benefit the realty sector, the real story lies in the fine print,” points out Dhruv Agarwala, Group CEO of Housing.com, PropTiger.com and Makaan.com. “All the initiatives... to improve road, suburban railways and metro connectivity, water management system, ease of living, invest 100 lakh crore in infrastructure over the next 5 years, all will create liveable cities and encourage people to invest in projects.
