By Avneesh Sood, Director, Eros Group
This year’s budget has laid the foundation for the performance of the real estate sector in terms of boosting economic growth and also enhancing the infrastructural development. The first Budget of the NDA 2019 made some big announcements on the infrastructure front and also on beneficial changes to the affordable housing segment. The focus on next-generation infrastructure to provide Ease of Living shows the modernization that the country has well adapted to and thereby will boost the real estate sector too.
The Budget passed up giving any additional income tax incentives to first-time home purchasers or giving higher assessment investment funds on lodging credits and house protection premiums. Nor did it raise house rent deduction limits. However, an additional deduction of Rs 150000 on interest on loans borrowed under affordable housing provide some direct tax relaxation to the lowest income earners and gave some clarity on the designated beneficiaries under the Pradhan Mantri Awas Yojana.
In order to give a boost to the affordable housing sector, Finance Minister Nirmala Sitharaman proposed to increase the tax deduction allowed under Section 24(b) of income tax law for payment of interest on housing loan to Rs 3.5 lakh, up from Rs 2 lakh earlier. This will be applicable for home loans taken up to March 31, 2020. And also the value of the property should not exceed Rs 45 lakh this proposal will give a major boost to the affordable housing and will help boost demand for the housing sector.
Moreover, nearly 1.95 crore houses are proposed to be provided to eligible beneficiaries under the Pradhan Mantri Awas Yojana. Affordable housing focus continues against a target completion date of 2022. This is very important since it will provide the vital budget housing segment with cheaper sources of finance, In addition, providing land from public sector enterprises for affordable housing will help solve land acquisition problems and it can also give a leg up to the sector.
On the FDI front, India’s FDI flows in 2018-19 remained strong compared to global at $54.2 billion, 6 percent higher than last year is going to be a new roadmap in the next few months. This will provide the real estate sector access to considerably more financial support than it has today. With the massive crackdown on black money, the taxpayer base has increased significantly. This is, at least in some way good news for the real estate sector as seeking home loans is now going to be easy for a larger set of individuals.
The allocation of Rs 100 lakh crore investments for infrastructure over 5 years is a welcome move, though we need a massive push to ensure that the country’s infrastructure meets global standards that would determine where India will be placed in the world by 2030. With the fiscal deficit, the center had exceeded its disinvestment target for the fiscal year 2018-19. Against a target of Rs 80,000 crore for disinvestment, the receipts touched Rs 85,000 crore the Government seems to be on the right path of taking charge of things and ensuring that $5trillion economy is achieved by 2024 – 2025. On NBFCs, RBI can now do a quick stress test of NBFCS and reassure markets on their actual strength and weakness and measures to ease them over a period of time. RBI can help tone down the doubt on that front and can help the ongoing crisis.
Concisely, while there were not many takeaways for the individual taxpayers, the budget also did not seem to favor any particular sector. Giving regulation of housing finance companies to RBI will remove irregularity and improve regulation. Housing finance corporations and real estate builders have by now seen a slowdown in the luxury housing segment. Affordable housing could provide a shot in the arm, at least for real estate developers with serious intentions. Finally, for the middle to lower income categories, the Pradhan Mantri Awas Yojana provides a significant opportunity for their dream to own a home. This dream could well be closer to reality.
Corporate Comm India (CCI Newswire)
