Budget 2019: What liquidity-hit real estate sector expects from Modi government

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Published: June 14, 2019 4:39:51 PM

Budget 2019 India: As real estate is one of the major contributors to the GDP growth as well a prospective job creator, a push to the lagging sector can help the government resolve the issues of growth and job creation quite a bit.

Budget 2019, Union Budget 2019 India, Budget expectations, real estate sector, Modi government, GDP growth, joblessness, liquidity crisis, NBFC sector, farm distress, first woman Finance Minister, Nirmala Sitharaman, Indian real estate, job creationUnion Budget 2019 India: After a blockbuster performance in the general elections, the Modi government faces the hurdles like declining GDP growth, high joblessness, liquidity crisis in NBFC sector, distress in agriculture sector, etc.

Budget 2019: After a blockbuster performance in the general elections, the Modi government faces the hurdles like declining GDP growth, high joblessness, liquidity crisis in NBFC sector, distress in agriculture sector, etc. Now it’s for the country’s first woman Finance Minister Nirmala Sitharaman to live up to the expectations and win the hurdle race by accelerating the rate of GDP growth, job creations and ensuring higher farm outputs, liquidity in financial sector – along with addressing scores of other issues – through a lively Budget.

As real estate is one of the major contributors to the GDP growth as well a prospective job creator, a push to the lagging sector in the Union Budget 2019 can help the government resolve the issues of growth and job creation quite a bit.

According to India real estate report – state of the market by Kotak, residential real estate ended FY2019 with 7 per cent yoy growth in sales and 6 per cent yoy decline in launches for full year FY2019, with trends accelerated in March 2019, reflecting a 43 per cent yoy decline in launched against 10 per cent yoy growth in sales.

As confusion over reform measures taken to cleanse up the real estate sector is considered one of the factors that causes the slowdown, Ramesh Nair, CEO & Country Head, JLL India, in his Budget expectations, said, “We expect that the government should address the concerns relating to reforms brought so far. For example, implementation of RERA regulations across the states uniformly will improve buyers’ confidence. It should also create a single window clearance mechanism at the National level for easy approvals. Government should also work to release the public land holding for the creation of additional affordable and mid-income housing. The need of the hour is also to significantly lower interest rates, thereby, improving affordability, liquidity and boosting housing demand. These collectively will propel new developments and new investments into the sector.”

Anuj Puri, Chairman – ANAROCK Property Consultants thinks single-window clearance and industry status for real estate projects, more tax sops for home buyers and investors in the Union Budget may help the struggling real estate sector.

According to Puri, the real estate sector has following expectations from the Budget:

Re-finance NBFCs: The liquidity crisis is the major factor preventing completion of over 5.6 lakh stalled units across top 7 cities. For this, the government could possibly increase the finance limits for NBFCs – a major source of funding for developers. This will help revive the sector to a large extent.

Increase bank funding to developers: Besides NBFCs, the government must take steps to ensure bank funding to developers as the severe fund crunch is contributing significantly to project delays.

Reinstate Input Tax Credit (ITC) in GST: Without ITC benefits, builders are seeing sizeable drop in their profits and will eventually pass the buck on to buyers in the form of higher prices. With the ITC benefit, property prices will remain under control and thereby boost sales, helping beleaguered developers to overcome some of their financial stress.

More tax benefits to homebuyers and investors: While the interim budget in February did try to woo back investors and buyers alike by offering some sops, there need to be more direct benefits by way of reduction in income tax slabs, higher relief on housing loan rates, and an increase in the deduction limit under Section 80C from the current Rs 1.5 lakh a year. The fact that the deduction limit under Section 80C was last increased in 2014 after a hiatus of a decade strongly indicates that the government could consider revising it now. Though it will eventually be an added burden on the exchequer, it will help bring back buyers and revive the sector.

Provide a stronger infrastructure push to drive growth: The government’s undisputed focus on infra development ultimately bodes well for the real estate sector. It not only boosts the economy but also helps create more employment, which is a major pain-point for the government. Infrastructure deployments needs to amplified across both urban and rural India.

Attract more investments into real estate: Indian real estate needs to be made more attractive to foreign investors, and the budget is an ideal platform from which to announce further incentives that will attract more foreign investments into Indian real estate.

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