What Real Estate sector gained from Union Budget, 2019
The newly appointed minister for Finance, Nirmala Sitharaman, presented the Union budget on July 5th. This year’s budget was the cynosure of all eyes and expectations were rife that a slew of measures would be undertaken to revive the real estate sector that has been going through a downbeat phase as sales have slowed down and consumer sentiment is low.
Let us take a peek into what the real estate sector is actually set to receive from the Union Budget, 2019.
A model tenancy law
The government has announced a Model Tenancy Law, which will replace the outdated rental law in our country. This change is slated to give a push to rental housing and increase the interest of investors, who are looking for rental income.
Focus on ‘Affordable housing for all’
The government plans to achieve its target of Housing for All by 2022, through the Pradhan Mantri Awas Yojana (Rural and Urban). It has sanctioned over 81 lakh houses under the PMAY-Urban scheme and an additional 1.95 crore houses have been proposed to be provided under the PMAY- Rural in the next five years. These houses are to be equipped with basic amenities like toilets, electricity and LPG connections.
Reviving the National Housing Board
A number of proposals have been announced to revive the non-banking financial companies (NBFCs) from the ongoing debt crisis and liquidity crunch. The government has announced a one-time credit guarantee for the purchase of pooled assets of highly rated NBFCs up to Rs 1 lakh crore. It has also allowed FIIs and FPIs to invest in debt papers of the NBFCs, which will provide them with the much- needed liquidity boost.
Additional tax deduction of 1.5 L on home loans
In the affordable housing section, the government has provided for a tax deduction of Rs 3.5 lakh on loans borrowed up to 31st March, 2020 for homes valued up to Rs 45 lakh. This takes the government’s Housing for All by 2022 initiative one notch ahead, says Sanjay Dutt, MD and CEO, Tata Realty and Infrastructure Limited.
Increased investments to push for infrastructure development
The government plans to invest Rs 100 lakh crore in infrastructure and its allied domains over a period of five years. This would mean the construction of better infrastructure like roadways, suburban railways and metro connectivity along with an extensive water management system. This would create cities with good infrastructure and encourage people to invest in projects even in the far-away areas. The finance minister also emphasized on transit-oriented developments (TODs) across the country and proposed a ‘One Nation One Grid’ initiative. Additionally, the government also reduced the corporate tax for companies having a turnover up to Rs 400 crore, to 25 per cent.
According to Mr Sanjay Dutt, MD and CEO, Tata Realty and Infrastructure Limited, "The union budget has come as a mixed bag for the real estate sector at a time when the industry is showing signs of revival. The government introduced schemes like ‘Bharatmala’, ‘Sagarmala’ and UDAN which have helped in improving the country’s infrastructure. Additionally, the availability of land belonging to CPSEs and central ministries to public infrastructure and affordable housing is expected to provide the much-needed impetus to the housing demand. We could say that while the liquidity concerns of the developers could have been addressed with the reintroduction of Input Tax Credit for under construction properties, this year’s budget highlights the government’s intention to further strengthen the economy."
In the overall analysis, one could say that although focused on growth, the 2019 budget did miss out on certain important aspects like the longstanding demand for online single-window clearance for projects and an industry status for the real estate sector. Expectations were also rife that the government would take measures to resolve the liquidity crunch to boost investor sentiment but no such announcements were made to bring investors back to the real estate market.