The real estate sector has applauded Finance Minister Arun Jaitley’s Union Budget. Market players are expressing their happiness on favourable initiatives announced for the real estate sector. Major push was given to affordable housing and on improving long-term demand in real estate. A number of secondary initiatives have also been taken to promote push in the affordable housing market.
Let us discuss the impacts of Budget 2017-18 on real estate in some detail-
Infrastructure Status to Affordable Housing
After several years of proposal and rejection, affordable housing has finally been given infrastructure status in this budget. This is the most welcomed move and will act as a catalyst to achieve Modi’s dream of Housing for All by 2022. With this step, developers who come up with such low-cost housing projects will be eligible for several initiatives like subsidies and institutional funding. This will also encourage private players to invest in affordable housing market.
Increased Project Completion Schedule for Affordable Housing
Project completion timeline for affordable housing has been increased to five years, thus giving the developers more time to sell their inventory. Giving more clarity on the definition of affordable housing, Arun Jaitley also announced that instead of ‘built up area’ of 30 and 60 sq meters, the ‘carpet area’ of 30 and 60 sq meters will be applicable for it.
Initiatives for Rural Housing
FM Jaitley also announced the development of 1 crore rural houses by 2019 which will not only provide better living conditions to the rural homeless but will also decongest urban areas by controlling migration. Moreover, steps for providing basic amenities like safe drinking water, sanitation etc., have also been taken.
Easing of Capital Gains Tax Norms
Government’s support for real estate sector was evident by the tax incentives announced in the budget. The relaxation on long term capital gains, tax rebates for builders and joint development agreements will help reduce their tax liability and encourage them to come up with more housing projects. Capital gains on Joint Development Agreement will be taxed only at product launch and the time period for capital gains tax has also been reduced from 3 years to 2 years. Real estate developers will get tax relief on unsold stock as liability to pay capital gains will arise only in the year a project is completed.
Though the salaried class was looking for more tax modifications, rebates for individuals earning up to Rs 5 lakhs will help increase their disposable income which, in turn, will positively impact the demand for affordable housing.
NHB Refinancing Individual Loans
Arun Jaitley also announced that in the year 2017-18, National Housing Bank (NHB) will refinance individual loans worth Rs 20,000 crores. This has come out as a major fillip for affordable housing finance companies.
Apart from these direct benefits for the real estate sector, several other initiatives have also been announced which will indirectly impact the housing industry-
Rs 23,000 crore allotted to Pradhan Mantri Awas Yojana (PMAY)
FDI norms to be relaxed further which will attract more foreign investors
Surcharge of 10% for those whose annual income is Rs 50 lakh to 1 crore
Budget allocation for highways raised to Rs 64,000 crore
Rs 2.41 lakh crore has been allocated to boosting transport infrastructure
Indra Awaas Yojana will be extended to 600 districts
Read More About…Union Budget 2017-18: What Real Estate Expects?