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.

Union Budget 2016: Developers look up to FM for revival

It’s Budget time again, and Indian real estate sector is yet again pinning on the hope of a slew of measures from the government which will see the revival of the struggling sector. 

While most of builders and realty experts believe that measures to improve consumer sentiments through income tax rebates and reduction in borrowing rates can put the life back into the system, others want the government to take long term measures by implementing the much-talked about REITs, Special Residential Zones and Real Estate Mutual Funds (REMFs) to make the real estate more vibrant. Here are the excerpts.

N. Nandakumar, Former President, CREDAI Tamil Nadu & MD,Devinarayan Housing and Property Developments Pvt Ltd.

As the Real Estate Sector has undergone considerable stress over the past couple of years, it is inevitable to announce substantial credible measures in the Union Budget 2016 with a long term view of reviving the Industry.  If the Central Government’s vision “Housing for All” is to be accomplished, the primary factors those influence the affordability needs to be definitely considered.

Few of the key areas that the FM should look into are:

·         - Raising the limit on interest payment towards exemption from tax purview.

·         - Announcing current threshold for principal repayment as part of Income tax deduction.

·         - Debt restructuring for all project loans given to developers without levy of penal interest and additional charges.

·        -  Initiatives that would lead RBI to consider special rate of interest for the category of affordable loans for different cities and metros as against the present uniform home loan policy.

·        -  Review the service tax component and other taxes for affordable home projects together with permitting creation of special residential zones which would cater exclusively to the lower middle income group and middle income group and EWS sectors.

·         - Abolishing import duties on construction equipment which would lead to more automation thereby reducing the project times and cost.

·         - Provide tax incentives for import of technology for rapid construction / cost optimisation.

·         - Reduce the implications of environmental clearances by increasing the threshold from 20,000 sq.m to 150,000 sq.m which would save considerable time and also provide the mandate to the local approving authorities by suitably incorporating norms to be adopted and development regulations of each state’s urban bodies.

Anuj Puri, Chairman & Country Head, JLL India

The real estate sector, which is emerging from a painful and prolonged slowdown, is expecting favourable and growth-stimulating announcements from the government in its forthcoming Union Budget. One of the major issues, property investors and home buyers face, is delay in completion of projects by builders across the country.

The government should offer buyers financial protection from construction delays. The existing provision allows buyers to claim tax benefit upto Rs 2 lakh for under construction property which should be completed within three years. If the completion date extends, the benefits reduce to Rs 30000 and the burden of buyers multiplies as they have to pay EMIs along with the rent for their current accommodation.

Instead of offering them full tax benefits only from post-possession, home buyers should also enjoy the benefits right from the time they start paying interest on their home loan. This will ease their monetary burden considerably and help more home loan disbursements. Similarly, as per the present provision, if a buyer purchases an under-construction property from capital gains, he can avail exemption only if the construction is completed within three years. Since there can be delays due to various reasons, the construction timeline should be extended to five years.

Provide more tax saving on home loan and house insurance premiums. The current limit of Rs 2 lakh should be enhanced to Rs 3 lakh to benefit more. Also, tax concessions on house insurance premiums should be introduced to encourage users to insure their homes from various natural calamities.

Rise house rent deduction limit for self employed, who draw pays without an HRA component, from the current maximum deduction limit of Rs 2,000 a month under 80GG.

As construction industry takes lion’s share in environment pollution, the Budget should provide more incentives to boost green buildings for sustainable development. Since the cost-factor plays a major role, the government should absorb the extra cost and introduce incentives to encourage buyers/builders to go green.

Make additional allocation to develop infrastructure in fringe areas of cities and metros to promote affordable housing. Also, developers of affordable housing projects should be provided with cheaper finance options to complete the projects in time.

Remove the Dividend Distribution Tax (DDT) to encourage REITs.  There has not been a single REIT listing ever since the announcement last year. The presence of DDT deters people to venture into it. The government should do away with it in the Budget.

Provide clarity on GST implementation. For the revival of commercial real estate, implementation of GST is vital. The government should indicate specific date for its implementation. The retail and ecommerce sectors also seek earlier implementation of GST.

Arvind Jain, Managing Director - Pride Group

Every Indian plans to buy a home as and when it becomes financially viable for him or her to do so, and every year brings a new section of young Indians who enter the stream of employed and harbor this aspiration. For potential home buyers, favourable budget is one of the major decision-makers.

Positive changes in indirect and direct taxation policy for salaried class, as well as incentives on property purchase, can boost their financial confidence. Raising the income tax exemption limit will have positive impact on long-term saving and spending patterns. As property is the most favoured investment option for every Indian, the available of more disposable income can satisfy their aspiration. Similarly, tax sops on home loans will trigger more demand for homes and hence help revive the industry.

Parveen Jain, national president, NAREDCO

The top real estate body National Real Estate Development Council (NAREDCO) too has lined-up a set of proposals to be included in the budget for the revival of sagging realty sector.

NAREDCO President Parveen Jain emphasized the need of industry status to the real estate sector and infrastructure status to the housing sector to enable them to attract more investments from large companies and inculcate a sense of “corporate culture and discipline” which will benefit the economy in general and customers in particular.

There should be Special Residential Zones (SRZs) for low cost or affordable housing similar to Special Economic Zones (SEZs) in PPP model where incentives and concessions should be provided through a single window. This will increase the supply of affordable homes in the country.

Land parcel should be adequately increased to meet the demand of 18.78 million housing units for EWS and LIG categories. To achieve the target of 20 million dwellings by 2022, the land and bank financing should be made easy.

Similar to other developing countries, the Housing Finance Companies (HFCs) should get an access to long-term funds like Provident Fund, Pension funds and Insurance for infrastructure and housing development.

Also banks should hike their allocation for housing from the current 3 per cent to 5 per cent of their incremental deposits. This additional fund should be channelized through HFCs registered under National Housing Bank.

To lessen the burden on home buyers, the government should increase the tax limit to Rs 3 lakh from the present Rs 2 lakh of the interest paid on home loans on a self-occupied house.

The three years period for completion from the year of borrowing should be abolished as this will provide the much-needed impetus to housing sector.

The priority sector lending should be extended for home loans – up to Rs 25 lakh for rural, small and medium cities, Rs 35 lakh for metros and Rs 50 lakh for mega cities.

Rental income should be taxed at a flat 10% rate. This will bring down the rentals.

The government should give top priority to Real Estate Mutual Funds (REMFs) and Real Estate Investment Trusts (REITs) and make them free from income tax for at least for 10 years, both for non-residents and residents.

External commercial borrowing should be allowed in all spheres of housing and realty development, including SEZ projects, and FDI is allowed in all housing projects including the under construction ones.

The real estate experts believe that given the required impetus, the real estate sector has the ability to turn around the Indian economy because of its forward and backward linkages with other key sectors and huge employment potential. Will the Union Budget 2016 meet their expectations and revive the sector or disappoint them again with a lacklustre show? We have to wait and watch!

This article also published in Merinews.com