Affordable home buyers and real estate developers will stand to benefit from the Union Budget. But other than the affordable segment, others felt left out.
While tax benefits will encourage more people to buy homes, developers will benefit as the liquidity problem is being addressed through recapitalisation of PSU banks and support to securitisation for NBFC assets. This will help in providing liquidity and credit flow to cash-strapped developers.
Anuj Puri, Chairman, Anarock Property Consultants, said the Budget has been formulated to restore confidence in the India growth story.
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“As far as real estate is concerned, the Budget had a few hits and several misses. Infrastructure stayed at the top of the government’s agenda. This is of course significant,” he said.
Affordable housing under the PMAY scheme has got a boost and it will benefit people in rural and urban India.
“The government announced major tax benefits that will help stimulate demand for affordable housing. Interest deduction up to ₹3.5 lakh for affordable housing (priced at ₹45 lakh) as against ₹2 lakh earlier will now be available until March 31, 2020. This can help attract first-time homebuyers,” Mr. Puri said.
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He said the plan to launch a ‘Study in India’ programme to attract foreign students in higher education will inevitably create more demand for student housing.
‘Industry status’
On the flip side, he said, “From the real estate perspective, the Budget did not meet many expectations as it failed to address the sector’s most pressing concerns. We may not see consumers and investors return to the market in sufficient numbers, barring in affordable housing. The all-important ‘industry status’ remained elusive, taxes were not sufficiently moderated and land reforms were not mentioned at all.” Shishir Bajaj, CMD, Knight Frank India said rental housing through creation of a model law would pave the way for development of institutional rental market in the country.
Niranjan Hiranandani, President, NAREDCO & CMD Hiranandani Communities said, “The idea to provide affordable housing will be a possibility and will be successful in all cities except Mumbai where there is a paucity of land. I believe the additional incentive of ₹1.5 lakh on interest on loans borrowed under affordable housing would give a boost to the real estate sector further.”
The proposal to invest more than ₹100 lakh crore for infrastructure over the next five years will help, he added.
Kamal Khetan, CMD, Sunteck Realty Ltd. said, “The FM has made an attempt to de-bottleneck issues surrounding real estate both from the buyer side as well as financing side for developers. To meet the housing for all by 2020, there is a direct intervention through exempting additional interest deduction of ₹1.5 lakh for home buyers under the affordable housing sector.”
“Whereas, sticking to fiscal path consolidation will result in a low-interest rate for home ownership for everyone and at the same time promise to look at tenancy law is an encouraging step for multiple homeowners,”Mr Khetan said.
Analysts said the additional deductions on interest on housing loan will lead to potential savings of up to ₹9.3 lakh for a single household for people with income of less than ₹18 lakh on maximum loan amount is welcome.
“This will create new demand for houses of up to ₹45 lakh in the current year, which is a big positive for the affordable housing developers,” said Neeraj Bansal, Partner, KPMG in India.
Nimish Gupta, MD South Asia, RICS, said the focus on rental housing can build on the agenda of ‘housing for all’ and add impetus to the residential market.
The Budget lacked luster as through NBFC crisis resolution was stated as agenda but was overlooked deeply,” said Parth Mehta, MD Paradigm Realty.