Union Budget 2016: Realtors Expect More But Happy To See Few Positives

When the Finance Minister presented his third budget speech in the Parliament, the housing sector was waiting with bated breath expecting the much-needed impetus to the sagging Indian real estate sector which has been in doldrums for the last few years.

Although there are no big-ticket announcements to cheer up developers and home buyers, realtors feel that Arun Jaitley has given some room for the sector to find its growth momentum when he made his point to promote agriculture, infrastructure and rural sectors while giving a push to affordable housing.  

Realtors and their associations though welcomed the budget proposals vis-à-vis real estate sector, they are cautious and refused to be overwhelmed.  Excerpts…

Budget Promotes Affordable Housing - Praveen Jain, President, NAREDCO

While referring the Budget as ‘growth-oriented,’ the National Real Estate Development Council (NAREDCO) has highlighted the impetus given to agriculture, rural sector development and infrastructure besides offering incentive to affordable housing by allowing 100 per cent deduction for profits from housing projects (upto 30 sq. mtr in metros and 60 sq. mtr in other cities). Praveen Jain, President, NAREDCO said, Rs 50,000 additional deduction of interest on home loan for first time home buyers, exemption of Service Tax on Construction of affordable houses and disallowing DDT for Real Estate Investment Trusts (REITs) are expected to stimulate the housing activity.

Rural Focus will Generate Domestic Demand: Dr. Mahesh Gupta, President PHDCCI

While applauding the Union Budget 2016-17 announcements, President, PHD Chamber, Dr. Mahesh Gupta said that the focus on rural India would go a long way to generate demand in the economy and give a push to overall growth and development of the country. 

He expressed happiness over the government’s proposal to increase the tax exemption limit on Home Loans interest for the first time home buyers for housing loans up to Rs. 35 lakh will give a boost to the real estate sector.

Dr. Gupta said, stimulus to real estate sector would provide a significant fillip to the economy and enhance India’s GDP.

Budget is Well-balanced to Face Adverse Global Pressure: Kapil Wadhawan, CMD, DHFL

This year’s union budget has been encouraging for the housing sector and the overall economy. The proposal to introduce 100% deduction to undertakings for construction of affordable housing will help us in realizing honorable PM’s “Housing for all by 2022” scheme.
                         
The proposal to introduce guidelines for renegotiation of PPP contracts and reform dispute redressal mechanism will encourage private participation in the development of affordable housing projects and road infrastructure.

Decision to exempt REITS from DDT is also a welcome move. This will ensure positive movement on real estate projects and will help in bringing the sector on a sustained growth path.

DHFL had recommended empowering the customer for greater affordability. In this context, the decision to give additional exemption of Rs 50,000 for housing loan upto Rs 35 lakh sanctioned in 2016-17 for 1^st time home buyer provided the cost of a house is not above Rs 50 lakh is praiseworthy and will definitely ensure that more Indians will fulfill their dream of owning a home.

DHFL welcomes government’s commitment to boost road infrastructure and address rural distress by skill development of rural population, allocating funds for MGNREGA scheme and providing support to agriculture. We are of the view that this year’s budget will enable the Indian economy to withstand adverse global pressure and move on the road to a more balanced, sustainable and inclusive growth. We will remain an attractive destination for investment over the medium and long term.
 

Below Expectations But With Some Positives, Anuj Puri, Chairman & Country Head, JLL India

To give him due credit, the Finance Minister has definitely made a concerted attempt to manage expectations with a balanced budget. While three of the real estate sector’s major expectations – increased HRA deduction, removal of DDT from REITs and boost to affordable housing by allowing 100% deduction on profits made by entities constructing them – have been addressed, the Budget offered no financial protection from project delays to home buyers.

Most first-time home buyers in the major metros will be left out of the additional Rs. 50,000 tax exemption announced today, as it is applicable only on houses worth up to Rs. 50 lakh with loans of up to Rs. 35 lakh for houses. This announcement will mostly benefit first-time home buyers in tier-III and tier-II cities. The infrastructure sector was a major beneficiary today.

The biggest announcement with implications for the real estate sector in India was removal of DDT from real estate investment trusts (REITs).

Budget Could have Done a Lot More for Real Estate Sector: Kishor Pate, CMD - Amit Enterprises Housing Ltd.

This Budget could have done a lot more for the real estate sector. However, there were some positives. The fact that the annual housing rent reduction limit has been increased from Rs. 24000 to Rs. 60000 could lead to an almost immediate uplift for rental housing across the major cities. This can also potentially encourage the sentiment for home ownership in the long run.

Also, first-time home buyers have been given the benefit of an additional deduction of Rs. 50000 on home loan interest for loans not exceeding Rs. 35 lakh, where the value of the house is no more than Rs. 50 lakh. This will result in improved home buying sentiment in smaller cities with lower housing costs, such as Pune. An improvement in sentiment will also be seen in the cheaper far suburbs of the metros.

However, this deduction is not sufficient to increase the sentiment much for first-time home buyers in the central parts of the metros like Mumbai, where housing prices are exceedingly high and such an exemption makes little to no difference in the burden on home buyers. 

The fact that the market indices took a nosedive immediately after the budget announcement more or less reflects the way sentiment in the housing sector has gone. However, if the RBI announces a cut in interest rates on the heels of the reduced fiscal deficit announced by the Finance Minister, it could be a day saver.

Not Enough to Infuse vibrancy in Realty Sector: Arvind Jain, Managing Director - Pride Group

Budget 2016-17 was far below expectations. Some leeway has been given to first-time home loan borrowers, but the relief will not boost demand in the metros. That said, service tax has been exempted for developers who are focused on constructing affordable housing with unit sizes not exceeding 30 square meters in the larger cities and 60 square meters in the smaller cities. This is a significant plus, and in line with the incumbent Government's intention to boost affordable housing.

Allocation to MNREGA and irrigation activities have been stepped up, so it is logical to expect rural income to rise from this year onward. This can positively affect rural consumption story and boost the growth of smaller towns. Encouragingly, Rs. 1500 crore has been allocated for the moderation of land records in the Digital India campaign, which will definitely have a positive impact on transparency in the real estate sector.

On the retail front, permitting seven days of operation for small and medium-sized shops in the unorganized retail segment will allow them to compete more effectively with malls. This will boost the demand for retail stores on high streets significantly.

The plans to revive inoperational civil airports in partnership with their States with a rather small allocation of Rs. 100-150 crore per airport can have positive implications for the real estate development in these cities. It will boost infrastructure, and airports are also know influencers of demand for all categories for real estate.

Budget Gives Grand focus on rural economy, infrastructure development: ASSOCHAM

Huge focus on rural economy with a commitment to double the farmers’ income by 2022, betting quite high on rail and road infrastructure and yet sticking to the financial discipline by retaining the fiscal deficit targets for 2016-17 are the most important takeaways from the Union Budget 2016-17, ASSOCHAM President Sunil Kanoria commented.

“A huge commitment of Rs 2.18 lakh crore on the rail and road infrastructure will not only kick start the economic growth but would also result in having a multiplier effect on India’s economy,” said Kanoria.

NAREDCO suggests slew of measures to put real estate sector back on track

(From L to R): R R Singh, DG, NAREDCO , Shakuntala Iyer, Director, Shander Properties , Navin Raheja, Governing Council Member, NAREDCO , Parveen Jain, President, NAREDCO , Gourav Jain, MD & CEO, Jindal Reality Ltd. and  Vijay Gupta,Orris Infrastructure Pvt. Ltd.

As preparations for the 2016 Union Budget are underway, the top real estate body National Real Estate Development Council (NAREDCO) has lined-up a set of proposals and requested the Finance Minister to include them to bring back the sagging realty sector on growth trail.

NAREDCO President Parveen Jain in a pre-budget Memorandum to the Government, wanted industry status to the real estate sector which he said will enable it to recover from severe slowdown. 

“Industry status will attract large companies and most importantly inculcate “corporate culture” and “industry discipline” which will immensely benefit the economy in general and consumers in particular,” he said.

According to him, most industry rules and regulations are applicable to real estate sector also and denial of industry status for funding purposes to the sector will further worsen the existing financial crunch and slowdown in demand because of erosion of capital and loss of confidence of investors and buyers.

Navin M Raheja, GC member and Patron along with Parveen Jain, president Naredco

NAREDCO has also demanded “infrastructure status” to the Housing sector, a long standing demand of the real estate developers, by adding a clause to the definition of “infrastructure facility” under u/s 80IA of IT Act 1961.

Explaining further about the clause to be added he said: The clause should read: “An integrated township and group housing development on area more than 10 acres involving provision of residential, educational, medical, community, commercial or institutional buildings and creation of required facilities including roads, water supply, water treatment, sanitation and sewerage systems and solid waste treatment and management systems”.

Jain also demanded creation of Special Residential Zones (SRZs) for affordable housing on the lines of Special Economic Zones (SEZs) where special concessions and incentives are built together with single window clearances. This will help increase supply of affordable housing on a large scale.

Central and State Governments, in the past, have attempted to address large number of issues detrimental to housing growth and provided fiscal concessions to builders and home buyers and tried to build strong public-private partnership to boost housing growth. In many ways it has paid dividends, but still there is lot to be done to provide shelter to all.

Jain said that the government land, wherever available, should be used as equity and government agencies encouraged to assemble additional land as much as possible. India is short of 18.78 million housing units and 96% of it is in EWS and LIG categories. Government is targeting to build 2 crore housing units by 2022. All this will be possible if land and bank financing is made easy.

He said that Housing Finance Companies (HFCs) should be allowed access to long-term funds such as Provident Fund, Insurance and Pension funds as all developing countries have access to such long term funds for housing and infrastructure development.

NAREDCO has suggested that banks should increase their allocation for housing from the present 3% to 5% of their incremental deposit. The additional 2% incremental allocation may be earmarked exclusively for canalizing it through housing finance companies registered with National Housing Bank.

President NAREDCO has requested government to give push to the real estate sector by increasing tax limit to Rs 3 lakh from Rs 2 lakh of interest paid on home loans on a self-occupied house.

Also, three years period for acquisition or completion from the year of borrowing should be dispensed with, said NAREDCO President, Parveen Jain, adding that this will provide much needed impetus to housing sector which is reeling under huge housing shortage in the country.

He said that priority sector lending need to be extended for home loans upto Rs 25 lakh for rural, small and medium cities, Rs 35 lakh for metropolitan cities and Rs 50 lakh for mega cities. Also, income from renting of properties should be taxed at a flat rate of 10%, he said, adding that high cost of houses and high property taxes lead to low rate of return (ROR) from rental housing, making renting out an un-remunerative proposition.

Jain said that the residential construction be taken out of 14.5% service tax net in the first place and this exemption should cover the builders and developers who are registered. Rise in excise duty on cement and steel would raise the unit cost by about 4 to 5%.

Jain asked the government to make real estate mutual funds (REMFs) and real estate investment funds (REITs) free from income tax for at least for 10 years both for residents and non-residents. The world over, REITs have been very effective instrument and source for funding housing projects because of various fiscal concessions and incentives provided by various governments to REIT units and the shareholders.

Demanding external commercial borrowing in all spheres of housing and real estate development, including SEZ projects, Jain said funding to real estate be allowed through FDI, particularly in under construction projects.

The size of Indian real estate market in 2013 was estimated to be USD 78.5 billion which is likely to grow to USD 140 billion by 2017. Between 2009-11, FDI investment grew at 8% but witnessed deceleration during 2012-13 to around 6.5% primarily due to sluggish growth of Indian economy, rising input cost and overall global economic sentiments. Now there is need to give push to this through fiscal incentives.

Jain emphasized that, given the impetus required, real estate sector has the potential to turn around the Indian economy and contribute to the growth of the country because of its backward and forward linkages with other sectors of economy and huge job potential.

NAREDCO wants single window system and FDI to revive realty sector

Sunil Mantri, Chairman of leading real estate firm Mantri Realty and also president of NAREDCO wants the government should speedily implement single window clearance system and bring in more FDI to Indian realty sector for its urgent revival.

Other than that the government should rapidly implement National Housing Policy and adequately fund urban development which will give a great thrust to the property market in the country, a company spokesman quoting Mantri, said.

Indian economy expects fundamental changes in the coming years in view of a stable government. Certainly, the property sector is a major stakeholder in taking the growth phenomenally high, he said. 

As the current urbanization level reaches around 30 per cent, a long road needs to be covered to reach the expected benchmark of 50 percent. With a cooperation of government, financial institutions and realty sector the goal seems to be achievable, the statement further stated.

Being one of the leading Real Estate Developers in Mumbai, the company is involved in various humanitarian and social activities. The team steers various projects of social welfare with a deep empathy and sympathy towards underprivileged people.