Budget May Offer Indirect Benefits to Real Estate Sector

Bengaluru, February 27, 2016: The much awaited Budget Session 2016-17 is finally underway with lot of hopes from the Government to bring in the much needed relief for the country. The tricky trade-off for the Finance Ministry to balance the funds flow will be tested to the core; this time especially due to mammoth plans being already laid. Real estate, which is dependent on over 30 allied industries and sectors, is hopeful for a silver lining. But with the clouds of political disturbances in the country looming, scope of any direct benefit to this sector are becoming null. Passage of Land Bill in this session is out now, with fingers crossed for GST and Real estate bill. Although, it is the demand revival and clearing of unsold inventory what this sector is craving for, the factor which might become prominent if our Honourable Finance Minister Mr. Arun Jaitley announces tax benefits, incentives, allowances, 7th pay commission, OROP, medical allowances, education benefits, benefits on saving and investments, etc.

“Huge commitments with respect to economic growth and infra revamp have been announced in the last couple of years, the fuel to which can be provided only when key reforms in the budget are announced. This sector is hopeful for direct benefits in way of Real estate bill and GST, but providing income tax benefits, allowances and better slabs for savings and investments, will somewhere add towards indirect benefits for this sector. End of the day, it is the purchasing power of a customer that justifies a real estate purchase and if these indirect benefits are made available, then demand is sure to revive in the long run”, states Mr. Rajesh Goyal, Vice President CREDAI-Western U.P. & MD, RG Group.

Tax structure revision a must

At present, the first income tax slab starts from Rs. 2,50,001 and tax savings are allowed to a maximum of Rs. 1,50,000. A person is then safe from tax liability till the time they are earning Rs. 4,00,000 annually. “If the Budget announces revision of tax structure by increasing the limit by another Rs. 50,000 – Rs. 1,00,000, there will be an additional disposable income available for the earner. Similarly, a Rs. 50,000 increase on the savings slab will allow an earner to foray into different ways of investments. This implies that a person will become safe from the tax liability till Rs. 5 – Rs. 5.50 lakh. A major segment of our population today is youth, but is without a home of their own. Announcements like these will allow them to expand their investment options towards higher budgets, thus allowing the inclusion of real estate as well”, explains Mr. Sushant Mutterja, CMD, Cosmic Group. Adding more weight into the topic and putting light on another aspect, Mr. Ankit Aggarwal, CMD, Devika Group elucidates “There is another angle at looking towards how revision of tax structure may help this sector to grow. Youth in India stands at over 50 percent today with most of them are being working singles, putting up on rented accommodations. If tax structure gets lenient in this Budget, there will be an overall shift towards better accommodation for renting. A 1 BHK tenant might shift to a 2 BHK and a person who is unwilling to stay on rent, might afford then. And, in best cases, many might even then be able to buy a property of their own as well. Thus, there will be a growth in rental housing demand as well as for end use and investment.”

Incentives from other sources

Understanding from a common man’s perspective, a decent Budget should be such that should not only bring relief to the citizens but at the same time, maintain a decent government surplus for the future as well. “What matters the most to any citizen is how much they are able to save, so that it can be further used towards other investments. Announcing incentives towards health and education will allow people to save money from this end and use them elsewhere. Enhancement of purchasing power is what ideally should be government’s motive in this Budget session so that people are able to save more and explore other bigger possibilities like real estate, etc. This will allow a better flow of demand in the sector plus regulate the flow of funds”, shares Mr. Vikas Sahani, CMD, Property Guru. Standing in sync and adding further, Mr. Vikas Khurana, Co-Founder, HomzCart avers, “All eyes are set on the Budget this year where mega announcements are awaited. A lot has been said and now is left to be done, and this Budget holds the key towards action. Indirect contributions for the real estate sector may get announced by way of seventh pay commission, OROP and other incentives towards lowering tax percentages and removal of multiple taxes. This is of much significance for the realty sector as demand will get generated only when customers are standing ready with easily available supply.”

Budget Session 2016-17 is planned to be held in two parts, first from 23rd February to 20th March then after a month break; from 20th April to 8th May. Thus, there is a long road ahead with ample to time to execute key reforms which should become a benchmark for the future years. Commenting upon how much importance this particular Budget Session carry for future Mr. Ashok Gupta, CMD, Ajnara India Ltd. concludes “The parliament session on the first day has begun on a low with hardly a few hours of activity. For the real estate sector, Real estate bill, GST and granting of Industry status will hold the key for future progress and demand dynamics. Announcements in the form of flexibility towards tax structure and savings, education, affordable housing, health and others will allow people to save money from one side and utilise it on other fronts. Real estate sector might reap the benefits directly or indirectly out of this Budget Session where the main motive of the government should be focused upon income savings and then influence people to invest on other mediums, to keep the momentum going.

Corporate Comm India (CCI Newswire)