Budget 2018: Industry Applauds Affordable Housing Fund; Sees Infra Projects As Investment Opportunity

What did the industry demand from the Union Budget 2018-19? Well, if we were to cut a long story short, in order to guarantee that a prospective homebuyer has enough left in hand to spend on housing, real estate developers asked for a rationalisation in tax slabs, housing loss set-off limits to be increased from Rs 2 lakh, waive the Goods and Services Tax (GST) from affordable homes or a lower GST rate, interest rate subsidies for mid-income groups, reduction in corporate taxes, abolition of stamp duty, etc.

Mani Rangarajan, Chief Business Officer – Platform Business Unit, Housing.com, said, “Union Budget 2018 has attempted to be inclusive and empower sectors such as agriculture, infrastructure and for that I laud it. However, now more than ever, as the real estate sector grapples with the combined effect of muted demand, after the demonetisation, real estate law and GST, I believe industry status for the real estate sector, combined with a higher interest deduction for homebuyers, would have been a much-needed reprieve for the industry.”

More affordable houses: A booster

However, Finance Minister Arun Jaitley's Budget Speech was far from encouraging for the real estate sector. Although the expectations remained unfulfilled, the industry has applauded the boost FM announced for the affordable housing segment and also, the expanding coverage under the Pradhan Mantri Awas Yojana, both rural and urban. “Expanding the coverage under Pradhan Mantri Awas Yojna (PMAY) will fulfill every buyer's dream of owning a housing,” says CHD Developers managing director Gaurav Mittal.

Vineet Relia of SARE Homes says homes that will be built under the PMAY would be a 'booster' for the sector. However, he was disappointed that there was no change in the GST rates, which could have given the sector a favourable push.

Sunil Agarwal, Associate Dean and Director, School of Real Estate, RICS SBE has also welcomed the Budget. “Lending for affordable housing will become a priority, which should encourage more private sector developers to build affordable homes. It will also add to the existing demand momentum for affordable homes. We are delighted to see that the government has recognized the challenges of rapid urbanisation and is taking efforts to meet them.”

Welcoming the housing fund, Ashish R. Puravankara, MD, Puravankara Limited says, “Establishing of a dedicated affordable housing fund under the National Housing Bank will give it a huge fillip.”

Kishore Bhatija of K Raheja Group is of the view that the Budget will create an environment for inclusive growth, a must for the Indian economy. "We have witnessed a populist Budget catering to the needs of the common man and the economy. The Budget has provided financial allocations in maintaining the Governments larger vision of Housing for All. The budget’s capital expenditure focussing on key sectors such as agriculture, infrastructure and housing, amalgamate to provide necessary momentum and thrust to the economy. Changes in corporate taxation will incentivise many to invest, and be competitive. Overall the budget creates an environment for inclusive growth, and infuses transparency into the system," says Bhatija.

Smart cities to attract more investment

The FM talked about the selected 99 smart cities that have been allotted a budget of Rs 2.04 lakh crore till date. The industry sees this as an investment avenue. “Smart cities will attract more investments into the market which will uplift the commercial reality and increase the demand for office spaces,” says Buildtech's managing director Pushpender Singh.

About 142 cities also receive investment grade ratings that help attract investments in the cities. Moreover, under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) programme, the focus would be to provide water supply to all households across 500 cities. Water supply contracts have already been awarded at a cost of Rs 19,428 crore.

Bengaluru & Mumbai suburbs real estate to get a boost

It was also positive to see suburban railways in Bengaluru and Mumbai find a mention in the Budget, with an outlay of Rs 17,000 crore and Rs 11,000 crore, respectively. Such an  “improved railway network and accessibility generally have a positive multiplier effect on real estate,” says Niranjan Hiranandani, CMD, Hiranandani Communities and President (National) Naredco.

Sarjan Shah, MD, Group Satellite  also puts it straight marking that it was a “disappointing budget from the perspective of private sector involvement in creating mass housing stock that will make homeownership a reality for all Indians. Budget has unfortunately ignored the stressed and vilified real estate sector that is in desperate need of Government support through specific targeted tax breaks that help make building affordable homes in India viable.”

Corporate tax extension a healthy move

Will the reduction in corporate tax pan out healthily? “The extension of corporate tax rate of 25 per cent to companies with the turnover up to Rs 250 crore from just Rs 50 crore till last year, will have a positive impact on the health of corporate India irrespective of any sector. With the focus on development in rural India, infrastructure augmentation, healthcare accessibility, education enhancement, employment benefits and smart city expansion, our country is gearing towards a stronger, healthier and brighter economy. We will be happy to contribute to our nation's growth story and accelerate development and inclusive growth,” says Purvankara.

Impact of computation of circle rate

Suresh Hiranandani, CMD, House of Hiranandani pointed out, that the move to allow a variation of five per cent between transaction value and circle rates for computation of capital gains will not impact transactions significantly in any of the metropolitan cities in India.” 

Fiscal deficit a major concern

One of the concerns is the inability to meet the fiscal deficit in spite of surpassing the divestment target. New measures adopted for reducing the deficit might push up the yields leading to higher interest rates for both corporates and households. Investors, in particular, will not be pleased with Long-Term Capital Gains on sale of equity and mutual fund investments. We could see some flight of capital from equity to the real estate class on the back of this move. The salaried class too stood to gain very little as the standard deduction of Rs 40,000 will provide nominal benefits to them.