In a bid to boost the coronavirus hit-economy, Finance Minister Nirmala Sitharaman has announced a Rs 2.65 Lakh Crore stimulus package under Atmanirbhar Bharat 3.0.
With this, the nation’s total virus relief adds up to 15% of gross domestic product.
So, what’s in for homebuyers?
In the latest package, the centre has decided to increase the differential rate between the circle rate and the agreement value from 10% to 20%. This will be applicable till June 30, 2021, for only primary sale of residential units of value up to Rs 2 Crore. Currently, Section 43CA of IT Act restricts the differential between circle value and the agreement value at 10%. Thus, the move is likely to benefit both developers and homebuyers.
Explaining the same, Anuj Puri, Chairman, ANAROCK Property Consultants, said, “For homebuyers, it is a clear added financial benefit to round off the existing offers and discounts. Additionally, the consequential relief up to 20% to buyers of these units under Section 56(2)(x) of the IT Act for the said period will definitely boost demand, especially in the affordable and mid segments.”
“For developers, this move will help clear unsold stock. As per ANAROCK research, there are approx. 5.45Lakh unsold units across the top seven cities priced up to Rs 1.5 Crore while another 49,290 units priced between Rs 1.5 Crore to Rs 2.5 Crore,” he further added.
Reiterating the same, Murali Malayappan, Chairman and Managing Director Shriram Properties said, “The decision of the centre to increase the differential from 10% to 20% will not help developers who are saddled with unsold inventory to clear their stock but will also allow individuals looking to invest pay less with the reduced differential gap; making homeownership more accessible.”
The real impact on unsold inventory
While many in the industry believe that the move to increase the differential between circle rates and agreement value will help developers clear their unsold stock; few think otherwise.
Giving a different perspective, Ram Naik, Executive Director, The Guardians Real Estate Advisory, said, “The major part of the unsold inventory in metro cities is priced over Rs 2 Crore, primarily in the range of Rs 4.75-12 Crore. Thus, a blanket announcement without the capping would have been better.”
Echoing similar views, Niranjan Hiranandani, President, NAREDCO and Assocham explained, “Due to the Rs 2 Crore cap, several projects in metro cities will not benefit from the announcement.” He further added that the ideal situation would have been one where this relaxation would apply to commercial real estate transactions as well.
Booster shot for PMAY-U
Five years after the implementation, Pradhan Mantri Awas Yojana (Urban) has made steady progress across states. As of August 2020, a total of 1.06 Crore homes had already been sanctioned in the country, of which 33% or approx. 35.18 Lakh homes are completed while another 66.23 Lakh units have been grounded for construction.
The additional outlay of Rs 18,000 Crore for PMAY – U is another welcome step towards achieving the ambitious Housing for All by 2022. “It will help 12 Lakh houses to be grounded, and 18 Lakh houses to be completed. This will help bridge the housing gap in the country to a good extent and is simultaneously an excellent economic growth driver by creating more employment,” explained Puri.
This is over and above the Rs 8,000 already allotted this year. “This will translate into more homes and more employment opportunities,” Hiranandani added.
Lastly, “The additional outlay of Rs 18,000 Crore will also encourage many developers to enter into the affordable segment,” said Satish Magar, President, CREDAI National.
To conclude
These measures will, undoubtedly, uplift sentiments of all the stakeholders in the real estate industry.
“In a bigger picture, these stimulus measures will go a long way towards job creation and infrastructure development in the country. Industry-wise, the increase in threshold limit for circle rate and transaction value will help developers, especially in the Mumbai market,” said Ashish R. Puravankara, Managing Director, Puravankara Limited.
“From buyers perspective, this, along with the Income Tax relief, will encourage fence-sitters to expedite their decision to buy or invest in a home,” he concluded.
