The preamble to the Budget presented to Parliament on February 28 by the Finance Minister, Arun Jaitley, contains the following major proposals:
In the year 2022, the 75th year of India’s independence, the Amrut Mahotsav celebrations will see the landmark of a roof for every family in India.
Housing for all, one of the vision statements of the Prime Minister, can be fulfilled only by building 2 crore houses in urban areas and 4 crore houses in rural areas.
Infrastructure is the key for economic growth. However, there has been a major slippage on this front over the last decade or so. Investment in infrastructural sector has, therefore, been stepped up by Rs. 70,000 crore in the year 2015-16 over the previous year.
Connecting each of the 1,78,000 unconnected habitations in India with all-weather roads will require completion of 1 lakh km of such roads.
Our infrastructure does not match our growth ambitions and needs massive public investments. Towards this end, the Finance Minister has proposed increased outlays on roads by Rs. 14,031 crore and Rs. 10,050 crore for railways during the year.
Keeping all the requirements under the infrastructure head, establishment of a National Investment and Infrastructure Fund (NIIF) with an annual flow of Rs. 20,000 crore has been proposed in the current budget.
The PPP model will be revamped whereby the public investment will be stepped up substantially.
Revival In order to release / raise funds, the Real Estate Investment Trusts (REITS) and Infrastructure Investment Trusts (InvITs) provided in the 2014-15 budget and acclaimed as major vehicles for fund raising, will be allowed partial ‘pass throughs’. This will trigger a major role in reviving construction activity.
Another proposal to raise funds is reintroduction of tax-exempted infrastructure development bonds.
Let us look at the implications of the housing and infrastructure thrust to the economy in general and real estate sector in particular. The thrust in the two areas will in itself trigger massive all-round construction activity, which will generate employment and enhance usage of primary raw materials like steel and cement. The National Housing Bank and the Infrastructure Finance companies will be able to provide both direct and refinance by taking advantage of the NIIF.
Some dampeners The increase in excise duty, coupled with freight increase as proposed in the railway budget, will make cement / steel dearer, though only marginally, increasing the cost of construction to that extent.
For individual home buyers, without special treatment for affordable housing or increased deductions, the urge for more investment may be halted at least initially.
As a part of curbing black money within the country, the proposal to introduce a comprehensive Benami Transactions ( prohibition) Bill is likely to act as a ‘caution’ to real estate investors though this is in national interest. The proposed amendment to the Income Tax Act to prohibit acceptance of advance of Rs. 20,000 or more in cash for purchase of immovable property may be another minor hassle.
The budget proposals can be considered quite encouraging to the real estate sector.
