Affordable Housing Gets Infrastructure Status, big boost to real estate sector –Union Budget 20
Bangalore, February 2nd 2017: In what is being hailed as an “Uttam” Budget, Finance Minister ArunJaitely put forward a Budget that seems to have something for everybody. One of the key developments with this budget has been the announcement of infrastructure status being accorded to affordable housing. This is a serious boost in the arm for the real estate sector which has also seen an increase in funding allocation under the Pradhan MantriAwasYojnana (PMAY) from Rs 15,000 crore to Rs 23,000 crore.
Speaking on the effect of the announcements made for affordable housing, Mr. Nagaraj Reddy, Chairman, CREDAI-Karnataka says, “Real estate developers in Bangalore have been an integral part of contributing to the “Housing for All by 2022” dream of the Honorable Prime Minister. We have a number of projects in the 1 and 2BHK configurations in areas such as Anekal City, Hoskote, Budhigere Cross, Doddaballapur Road, Hosapalya, Hongasandra, Kambipura, Amruthahalli, Bommanahalli, Hennur etc. With this budget, the subsidy scheme that was announced by the Prime Minister in December 2016 of providing a 6.5% subsidy for first time buyers investing in a home of 65 sqmts and with an income of less that Rs 50,000, will have its eligibility announced soon. Along with the reduction in tax on the salaried, these two factors can be a huge boost to the sector”.
Speaking on the Budget and the announcements towards the financial standing of the realty sector, Mr. J. C Sharma, President, CREDAI-Bengaluru says, “This has been a balanced budget for the sector with areas such as infrastructure, growth, housing and private as well as foreign investments all being addressed. With the announcement that the government borrowing program has been lowered strategically, it also means that there is now a chance for interest rates to be pushed down further. While these new measure will definitely attract investors and augment resource allocation for the sector, the same should also benefit its allied sectors. The tax incentive of increasing the period for completion under the housing project within 5 years' (as against 3 years’) and making the carpet area (instead of built-up area) as the criteria is a welcome move”.
The specific relief granted on the tax front, such as reducing the holding period for immoveable property from 3 to 2 years, and shifting the tax incidence on joint development agreements at the time of completion provides much needed clarity to some of the tax ambiguities plaguing the sector. However, the statement on relief to developers on notional rent on unsold inventory for a one year period implies that it will otherwise be taxable, and this could result in a rush to liquidate inventory and perhaps, a reduction in prices”
Speaking onthe opening up of the market with the reduction in income tax for the salariedclass, Mr. Suresh Hari, Secretary, CREDAI-Bengaluru says, “As a sector we werenot looking at drastic measures to be taken, rather, simple, small steps, allworking towards the goal of enhancing the real estate sector. I believe thishas been done with this budget. With the lowering of tax for the salariedclass, especially those in the Rs 3 to Rs 5 lakh per annum segments, thegovernment has now ensured that there is more spending power and this willdrive investments in real estate. Further, the announcement of NationalHousing Bank refinancing individual loans worth INR 20,000 crore in 2017-18 islikely to give a push to affordable housing.”
Experts fromthe real estate sector in the city also believe that with the abolition of theForeign Investment Board and the announcement to a new roadmap to a better FDIpolicy will ensure that the sector gets a financial shot in the arm. This alongwith the introduction of GST by July 2017 will put the sector on the right pathto increased development.