Budget 2018: Affordable housing gets a big boost

New Delhi, February 04, 2018: Real estate and its allied sectors are the second largest employers in India, next only to agriculture. Most estimates believe that real estate in India will touch the $180-200 billion mark by 2020 and is expected to grow by 30% over the next decade. The importance of the housing sector can be gauged from the fact that it alone contributes about 5% of the GDP.

The law establishing RERA in the states, introduction of GST and focus on affordable housing are initiatives that have transformed the real estate sector. The promulgation of RERA has made realty more transparent and has helped protect consumer rights – something that previously has been a concern for homebuyers. GST has converted India into a unified market and helped the ease of doing business according to financialexpress.com.

The government’s focus on affordable housing and its declared mission of providing Housing for All by 2022 have given a huge boost to the industry, and today, affordable housing is the fastest growing segment in the market.

Looking at the Budget from the realty lens, one thing needs to be recognised clearly. Realty will thrive only if India thrives! If the economy is stagnant or not growing fast enough and realty booms, then it creates a bubble, which is undesirable on every count.

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In the Budget proposals, several measures have been announced that should ensure that India continues on a high growth trajectory. The focus of the Budget has been on the rural and agricultural sectors. But what the increased spending on the agricultural sector will do is give additional funds in the hands of the farmers and drive the latent demand. This can only be good for the economy. The National Health Protection Scheme, which will give 10 crore underprivileged families up to `5 lakh annually for medical expenses, is a transformative measure. The raising of the revenue cap for MSMEs to Rs 250 crore to avail of the reduced corporate taxation rate is also a welcome proposal as it will allow greater investment by such companies.

As far as realty is concerned, three proposals are welcome. First, the announcement of a dedicated fund under National Housing Bank for affordable housing.

Financialexpress.com further added that while the stock markets may react negatively to the imposition of the long-term capital gains (LTCG) tax, this actually brings a parity between equities and real estate as asset classes. Earlier while LTCG on equities were tax-exempt, those on real estate were taxed. It is expected that with this move, real estate will become a more desirable investment; more so because while the LTCG on real estate can avail of indexation benefits, these are not available for LTCG on equities.

The announcement of an outlay of over Rs 4,000 crore on smart cities is another welcome development though it is a project with a long gestation period. For India’s IT capital, the announcement of an outlay of `17,500 crore to develop a 160-km long suburban rail network is a huge positive. This allows decongesting the city and opening up new areas for development and makes the city further attractive to MNCs & FDI.