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  1. Union Budget 2017: ‘Infrastructure status’ gives housing sector a lot to cheer about

Union Budget 2017: ‘Infrastructure status’ gives housing sector a lot to cheer about

The positive from this ‘infrastructure status’ means that developers can access foreign funds at a cheaper cost by way of debt; and it will be a ‘priority sector lending’ for banks

By: | New Delhi | Published: February 2, 2017 8:54 AM
Economic Survey 2017, Budget 2017, Property, Arun Jaitley, Finance, Narendra modi, Note ban, demonetisation In his Budget Speech for 2017-18, the finance minister gave the housing sector much to cheer about. (Reuters)

The year 2016 was one with many challenges—from Brexit to Donald Trump getting elected as the US President, and the global economy definitely faced tough times. In India, it was demonetisation.

Given the scenario vis-a-vis the issues that may come up as regards implementation of GST, the expectations were that finance minister Arun Jaitley would have a tough time balancing the challenges, and if someone said he was expecting much of positives from the Budget proposals, the response would have been sceptical. And yet, in his Budget Speech for 2017-18, the finance minister gave the housing sector much to cheer about.

There are four Budget proposals that will have a positive impact on the real estate sector.

1. The focus on affordable and low-cost housing; 2. Capital gains tax being applicable for property owned for two years instead of three; 3. Infrastructure growth having a positive impact on the real estate sector; 4. The proposals relating to income tax, which will also result in a positive situation for the real estate sector. Along with these, three other aspects will also have a positive impact on real estate.

1. Creation of 1 crore rural houses by 2019; 2. Increase in outlay for rural housing under the Pradhan Mantri Awas Yojana (PMAY) from the previous R15,000 crore to R23,000 crore; 3. Enhanced allocation for infrastructure, amounting to R3,96,135 crore in 2017-18.

The past few months have seen affordable housing being viewed as a priority for the Narendra Modi-led NDA government. So, when the proposal to give it ‘infrastructure status’ was announced by the finance minister, it evoked a reaction of ‘as expected’. The positive from this ‘infrastructure status’ means that developers can access foreign funds at a cheaper cost by way of debt; and it will be a ‘priority sector lending’ for banks. Not just will this be positive for the sector, but the PMAY and ‘Housing for All by 2022’—both initiatives of the Prime Minister—will get speeded up, and home seekers will definitely gain.

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The criteria for low-cost or affordable housing has been proposed to be changed—from a ‘built-up area of 30-60 square metres’ to a ‘carpet area of 30-60 square metres’. For home seekers in the four metros cities of India, this may not have a major impact, but in other locations this will have a positive impact. Both buyers and builders will have reason to cheer as the low-cost affordable housing segment gains.

From the perspective of home buyers in the four metro cities, the restriction of 30 square metres is something that could have been reviewed and enhanced.

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