The first budget post the GST-regime is out, and India’s infrastructure development received priority in Jaitley’s budget. There were no significant measures announced for the real estate sector, in particular, but real estate experts feel that the boost to infrastructure would augur well for the sector in the long run.
Infrastructure focus to spur real estate growth
To begin with, the boost to infrastructure is being hailed as a positive announcement for the realty sector. “We understand the government’s focus on affordable housing to achieve the target of housing for all. This budget was largely inclined towards the same. The rural infrastructure push will surely boost added housing in these areas, resulting in employment generation,” says Manoj Paliwal, Chief Marketing Officer, Omkar Realtors and Developers Pvt Ltd.
“Further, the introduction of a long-term capital gain tax of 10% on shares is a step towards creating a bit of level playing field between these two assets classes, i.e., the real estate and stock market,” he added.
GST revision for real estate ignored
An important announcement that was missing from the budget was a reduction in GST rate. An overhaul of GST on real estate would have given a shot in the arm to the sector. The same was also reflected in a recent survey conducted by RoofandFloor where as many as 36% respondents voted for reduced GST rate. At present, under-construction properties are levied a GST of 12%.
Concurring the same, Sarojini Ahuja, VP Sales & Marketing, Transcon Developers, expressed disappointment saying, “We were expecting a revision in GST rates so as to pass on the additional benefit to homebuyers.”
“Infrastructure is the growth driver of our country. Urbanisation is our opportunity and priority,” said Finance Minister Arun Jaitley while presenting the Union Budget for the current fiscal.
- An all-time high allocation of Rs 50 lakh crore was proposed for infrastructure development in the country. The government also said it would monetise select central public-sector enterprises, using Infrastructure Investment Trusts (InvITs).
- The construction of 35,000 km of highways under the Bharat Mala project will be completed by the end of the financial year 2018.
- Redevelopment of 600 major railway stations has been taken up. Further, 150 km of additional suburban corridors is also being planned.
- Mumbaikars have reason to cheer with the proposal to expand and strengthen the transport network for the city. To improve intra-city connectivity in the financial capital of India, an additional of 90 km of tracks to Mumbai’s local train network is proposed with an estimated budget of Rs 11,000 crore.
- A suburban network of 160 km is planned for Bangalore. Moreover, the government has decided to allocate Rs 17,000 crore for the Metro in the city.
Applauding the announcements, Yadupati Singhania, CMD, JK Cement Ltd, says, “India is at the cusp of an infrastructure revolution, and the budgetary support of Rs. 5.97 lakh crore for FY19 will be a big positive for the sector.”
Improvement in regional air connectivity
We are ensuring that even those citizens who wear Hawaii chappal can fly in a hawai jahaj (aeroplane),” Finance Minister Arun Jaitley.
At present, the Airport Authority of India has 124 airports. To achieve its ambitious aim, the government has proposed to expand this capacity by five times to handle close to one billion trips each year. Further, under the Ude Desh ka Aam Naagrik (UDAN) scheme, the government has announced that it will connect 56 unserved airports and 36 unserved heliports in the country.
Smart Cities mission
The budget has earmarked Rs 2.04 lakh crore for the Smart City Mission with 99 cities selected for development in FY2019. Further, about 10 cities are expected to be developed into iconic tourist destinations.
Women empowerment
The take-home salary of new women employees will increase in the formal sector. Also, the EPF contribution rate for women employees for three years will be 8%.
But will the employer still contribute at the extant rate of 12% is something that needs to be clarified. With increased disposable income, there might well be more women homebuyers.
Capital gains on immovable property
“Currently, while taxing income from capital gains, business profits and other sources in respect of transactions in immovable property, the consideration or circle rate value, whichever is higher, is adopted and the difference is counted as income both in the hands of the purchaser and seller. Sometimes, this variation can occur, in respect of different properties in the same area, because of a variety of factors, including the shape of the plot and location,” said Jaitley.
Thus, in order to minimise hardship in real estate transaction, the finance minister has proposed to provide that no adjustment shall be made in cases where the circle rate value does not exceed 5% of the consideration.
“It will help in terms of some extra savings if there is parity between the market rates and the ready-reckoner rates. Cities which are not under the heavy influence of real estate investors and where prices are rational may benefit from this announcement,” says Anuj Puri, Chairman, ANAROCK Property Consultants.
Affordable housing
The government has announced a dedicated affordable housing fund under the National Housing Bank (NHB) for priority sector lending. Further, one crore houses will be built under the Pradhan Mantri Awas Yojana (PMAY) this year in rural areas.
Hailing the announcement, Sarojini Ahuja says, “This year’s Union Budget was inclined largely towards the fulfillment of the government’s dream of ‘Housing for All 2022’ and allocation of funds for affordable housing was a boost.”
“The government assuming ownership of NHB from the RBI may shift the focus of NHB from regulation to development,” opines Mayur Shah, Managing Director, Marathon Group and President CREDAI MCHI.
Expectation vs reality!
While some of the realty sector demands were met, some were partially addressed, and a few were completely ignored.
It is proposed that no adjustment shall be made, in cases where the circle rate value does not exceed 5% of the consideration
Was the budget a populist one?
“Jaitley has managed to balance populist demands, the need to support economic growth, and Narendra Modi’s focus on fiscal discipline and reforms. I would rate the budget at 3 out of 5,” said Niranjan Hiranandani, President of NAREDCO.
The real estate sector did not receive industry status as hoped for. But 2018 is expected to be the good year for the real estate market as the government estimates 7.2-7.5% GDP growth in the second half of the current FY18.
“With fiscal deficit slipping to around 3.5% of GDP in 2017-18, the government seems to be on the right path of taking charge of things and ensuring that the fiscal deficit target of 3.3% of GDP for 2018-19 is achieved,” concludes Anuj.