#Budget2017: It Is Time For Real Estate Sector To Bounce Back

As the Union Budget 2017-18 was being presented in Parliament by Union Finance Minister Arun Jaitley on February 1, all eyes and ears were eagerly awaiting a major relief to the majority of the population of our country. The real estate sector is one of the largest employment sector with more than 25 per cent of the population. It also contributes to almost 20 per cent of India's gross domestic product (GDP).

Though the government had already announced reforms like Real Estate Regulatory Bill with its benefits for both developers and consumers, this Union Budget was expected to bring some more relief to the table. 

Infrastructure status makes affordable lucrative

In his Budget Speech, the finance minister made an important announcement wherein affordable housing was given an infrastructure status. This announcement will have long term effects which include an increased participation from private players into this segment. This will impact in giving a major boost to the affordable housing segment since it has its benefits for the developers which in turn will be passed onto the end customers. With this sector being given infrastructure status, the developers will now be able to obtain institutional credit easily, hence, the cost of borrowing for projects would go down. The sector will also witness transparency with the announcement of this reform along with RERA. All these reforms are making the affordable segment lucrative for developers to venture into.

Better investment opportunities

Developers will get tax benefit on unsold stock, as they will need to pay capital gains only in the year when the project is completed; also, reduction in the holding period of assets from three years to two years has been another noteworthy step concerning capital gains taxation requirements on land and buildings. Reduction in the holding period will substantially reduce the capital gains tax hence, providing tax benefit to several asset holders. Another impactful announcement was the abolition of the Foreign Investment Promotion Board (FIPB); this is great initiative as this will reduce the regulations that are required for investment in India from overseas making it easier for them to invest here.

Reduced lending rates a reason to invest

Furthermore, banks have reduced their lending rates on home loans, too. This will lead to making real estate more lucrative for home buyers. This reform along with affordable housing is making this sector attractive for people to invest in. Also, with the inclusion of railways in the budget allocation, this year has seen an active approach towards ensuring a quick overall development by allocating wisely in infrastructure basics like roads, railways, airports, inland waterways, which cumulatively contribute to a developed ecosystem in the real estate space.

Looking forward to GST

We are also looking forward to the Goods and Service Tax (GST), which the finance minister is sure will meet its deadline. As under this, the developers will be paying lesser tax on materials like steel, cement and other such input items, since tax credits would be available for set off at various stages. This will reduce the construction cost which in turn will lead to lowering the final cost for the end customers.

Overall, this year's budget looks very positive for the real estate sector and the government has done well to create consciousness for the need to increase tax compliance. Demonetisation only had a momentary effect on this sector. With all these provisions in place, the sector is expected to bounce back quickly.

Rahul Shah is the CEO of Sumer Group.  With an experience of more than 11 years, he has expanded Sumer Group as one of the foremost real estate developers in Mumbai. He has largely steered the successful development of over 9 million square feet of land with an additional 14 million square feet area under construction.