Budget 2020 to stimulate buyer sentiment but fails to cheer real estate

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Updated: Feb 02, 2020 6:09 PM

Budget 2020: Apart from giving the affordable housing some push and providing some relief on the personal tax front, among others, no direct benefit was provided to real estate.

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Budget 2020: Finance Minister Nirmala Sitharaman’s second budget, presented in Parliament on Saturday, left the real estate sector – which was betting big on it for revival of fortunes — highly disappointed. In fact, apart from giving the affordable housing some push and providing some relief on the personal tax front, among others, no direct benefit was provided to real estate.

For instance, the Budget missed any major announcement for easing liquidity in the realty sector and did not announce any measures pertaining to implementation of land reforms. Also, developer and investor community expectations on budget provisions pertaining to increased sectoral allocations and deductions remained largely unmet.

“The Budget has a long-term focus, but misses on the ‘quick fixes’ the sector needs urgently,” said Anuj Puri, Chairman, ANAROCK Property Consultants.

Satish Magar, President, CREDAI National, also said that the Budget 2020 has not been encouraging for the Indian real estate sector which needs immediate attention from the government.

“No sector-specific measures were announced for real estate and as an industry we expected more bolder steps from the government to revive the ailing sector such as providing more liquidity for the sector, onetime restructuring of loans, and tax deductions on home loans to give impetus to buyer sentiment. Unfortunately, none of these issues have been addressed, except providing tax holiday for one more year to affordable housing developers and loan sanctioning – which was due for some time,” he said.

The Budget surely has some positives — like, affordable housing continues to be the government’s focal point for real estate, and personal tax relief across various income slabs will invariably increase disposable income at the hands of the middle class and boost their consumption capabilities. Also, infra development — which has a major multiplier effect on not just the overall economy but on the real estate market as well — remains on top of the government’s agenda of propelling economic growth. However, the sector needed more.

“The Union Budget 2020 had very few measures for the real estate sector, which is one of the major contributors to India’s GDP. Apart from the personal income tax relief and a few sops for affordable homes, there have been pressing concerns in the real sector that have not been addressed. There was an urgent need to address the challenge of liquidity faced by the sector, especially after the NBFC crisis. The budget could also have revived the Input Tax Credit for housing sector to provide relief to developers and home buyers, where-in homes could have been made available at lower cost,” said Lincoln Bennet Rodrigues, Founder and Chairman, Bennet & Bernard Group.

In fact, some of the other aspects that the government that could have been addressed in the budget are granting of industry status to the overall real estate sector and implementation of single window clearance. A key expectation was the restoration of income tax benefit on a second home which would have benefitted home buyers in a big way and also stimulated the real estate sector.

Some industry experts and developers, however, welcomed the budget proposals.

Ankur Gupta, Joint Managing Director, Ashiana Housing Ltd, said, “The middle income and affordable housing segment in the Indian real estate will see a continuous boost with the finance ministry’s announcement on the sector. Certain other factors like liquidity crunch, funds at lower rates, additional foreign investments, single window clearance, etc. should also have been a focal point in the finance ministry’s agenda since they will drive a steady, speedy growth of the sector.”

“We welcome the Budget announcement of providing some relief on the personal tax front and some sops to first-time homebuyers. The extension in the transaction values and circle rate is another appreciating step for the sector. Considering the rising demand for affordable housing, the government has announced the extension of one year till March 2021 on the deduction of Rs 1,50,000 on sanctioned loans. This will encourage prospective buyers to avail more benefits and invest in real estate. The emphasis given on infrastructural development of the country will help in seamless connectivity and also give thrust to the realty market,” said Santosh Agarwal, CFO, AlphaCorp.

Rahul Singla, Director, Mapsko Group, said, “Extension of additional deduction of up to Rs 1.5 lakh on the purchase of affordable homes for one year is a welcome move. The government has also provided tax incentives and enhanced the spending capacity of buyers. These measures will stimulate buyers’ sentiment and encourage them for investment. This will further decrease the inventory size and promote new launches in the segment.”

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