The Industry Speaks on the Union Budget 2019

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The Union budget has become a very important platform for policymakers to demonstrate their intent to carry forward the growth agenda and address the immediate issues facing the economy. Finance minister

The Industry Speaks on the Union Budget 2019

The Union budget has become a very important platform for policymakers to demonstrate their intent to carry forward the growth agenda and address the immediate issues facing the economy. Finance minister Nirmala Sitharaman’s maiden budget is prudent with a 3.3% fiscal deficit target, yet providing for long-term infrastructure development and social growth that is a commendable achievement. The proposal of raising funds through overseas sovereign bonds is a bold step aimed to help support the ambitious RS 100 trillion-infrastructure overhaul. While the real estate sector had a list of demands, vis-à-vis the Union Budget 2019-20, we look at what the finance minister, Nirmala Sitharaman, managed to give the sector and the demands that went unheeded. Additional tax benefit of Rs 1.5 lakhs for affordable homebuyers. The budget strives to achieve the right balance in terms of introducing long-term growth propellants while addressing the near-term deterrents at hand. The Housing and Urban Affairs Ministry has received a 12% hike in budgetary provisions in the Union Budget 2019, while allocations for metro projects and the PMAY scheme have increased by 25% and 5%, respectively. The Housing and Urban Affairs Ministry’s budgetary provisions were pegged at Rs 48,000 crores in the Union Budget 2019-20, a hike of nearly 12% from 2018-19. The Pradhan Mantri Awas Yojana (Urban), an ambitious program of the Modi government, has been given Rs 6,853.26 crores, as against Rs 6,505 crores in 2018-19. Similarly, there has been an increase of nearly 25%, in the allocation to metro projects across the country.

Gaurav Gupta, Director Omkar Realtors & DevelopersThe first Union Budget announced under the re-elected government was inclined and focused towards affordable housing. Additional exemption in income tax on home loans under affordable housing by 1.5 lakhs for homes up to 45 lakhs is a good step by the Government. This will encourage more and more fence-sitters and first-time homebuyers to take quick decisions regarding property purchases. It is a welcome move and we are hopeful that the customers and investors will show interest in the affordable housing sector. This move is expected to result in some momentum in the beleaguered real estate sector.

Anand Moorthy, CEO, Props (AMC)While the introduction of GST has brought many taxes into one, for real estate it has only increased the burden on developers and buyers. The idea of GST was to bring state and central taxes into one. The state stamp duty is still applicable, which doesn't make sense since the cost of acquisition has only increased. One needs to note that real estate stamp duty contributes more than 50% of the total revenue of the state governments and further burdening the consumers with central taxes is only going to affect the industry, which it has! From a homebuyer's perspective, the burden was 12% a year back, which is now brought down to 5%. The homebuyers pay the highest taxes in the world to the tune of 12-14% to buy an under-construction house, which contributes to more than 60% of real estate transactions. For developers, earlier it was a set off from the GST paid on construction materials to the GST collected from individuals. They never intended to pass this benefit to consumers, until the markets did not pick up, they started passing 50% GST input credit benefit to consumers. With the recent change of no GST input credit, even the developer loses the GST set off benefit. Policies like GST being frequently changed clearly establish that it is not a well thought for industries like a Real estate which is a 2nd largest job creator in the country.

Ms Hiral Sheth - HOD, Marketing, Sheth CreatorsThe expectations were quite high as Finance minister Nirmala Sitharaman presented her maiden budget showing thrust on affordable housing. The major highlight of the budget was the proposal of the additional tax deduction of Rs 1.50 lakh on interest paid on home loans taken up to March 2020 for the purchase of an affordable house valued up to Rs 45 lakh. This move is expected to benefit the homebuyers to a large extent and will bring the fence-sitters back in the market driving demand. The Government's support to the NBFC sector will address the liquidity crisis which has spread its wings from the past year or so. Also, the reforms to promote rental housing will provide a much-needed boost in the Government's vision of Housing for All. The allocation of Rs 100 lakh crore investments for infrastructure will eventually boost the residential and commercial markets thereby propelling the growth of the real estate industry. 

Ms. Sarojini Ahuja - VP, Sales & Marketing, Transcon TriumphThe Government will be undertaking several reforms to promote rental housing. Concerning the housing shortage in the country, this will be a big boost to the real estate sector. The Government also proposes the NRI portfolio investment route merged with a foreign portfolio investment route. This will lead to an increase in NRI investments in the Indian capital market. The decision to allow foreign institutional investors to subscribe to REITS and INVITs is also a welcome move. The Government has also proposed to relax local sourcing norms for FDI. FDI in real estate will provide a significant boost to the sector in terms of greater foreign capital inflows thus creating more job opportunities and revitalizing the growth of the realty sector.

Pankaj Goel, Secretary, CREDAI National & Director, Express Builders" New government with the clear-cut mandate has tried to provide a further impetus to the housing sector. In budget 2019 the finance minister allowed an additional deduction of up to Rs 1, 50,000 on interest paid on home loans borrowed up to March 31, 2020, for purchase of an affordable house valued up to Rs 45 lakh. This will be in addition to the existing interest deduction of Rs 2 lakh. Among other measures announced to lift housing sectors, the Finance Minister shifted the base year for holding period to calculate long-term gains from immovable property to 2001 from 1981. Regulation of Housing Finance Companies is being returned from NHB to RBI, this would bring about much-needed reforms for the financing of the real estate sector. Hopefully, this would give a boost to the real estate industry."

Samyak Jain, Director, Siddha Group"The Union budget announced with the aim of nation’s growth will bring in a quick boost to the real estate sector as the government has decided to continue its focus in making housing more affordable for large population along with the promotion of affordable housing. The government’s imperative step on additional income tax deduction of Rupees 1.5 Lakh on interest paid on home loans benefits the homebuyers will bring in the fence-sitters back to the market. Additionally, the proposed tenancy law will help the tenants, as well as the landowners, that will enable streamlining of the Indian rental market. Further, the move taken to enhance the infrastructure and connectivity will not only favor the realty sector but also help other industries and create employment opportunities.”

Tushar Dubash, Director, Duville Estates“This Union Budget 2019-20 will ensure the all-round growth of the economy and boost the nation’s GDP. The government’s proposition on several reforms for rental housing will benefit tenants and owners alike. The modern tenancy reform will help reduce reluctance to rent, enhance the supply of rental homes allowing transparency during the agreement. The announcement made on additional income tax deduction of Rupees 1.5 Lakh on interest paid on home loans will boost the affordable housing segment. The government's proclamation of the tax holiday on profits earned from affordable housing will further motivate the developers. We also welcome this move for Infrastructure development, where the key factor in the growth of real estate has been given significant importance as improvement in road and rail connectivity, seaports, aviation, will be instrumental in changing the face of the industry. The proposed budgeted expenses in various sectors; Rural, Infrastructure, and Education will have a positive impact on the economy allowing us to be optimistic about the real estate market and we look forward to a productive year.”

Arun MN, Founder & Managing Director, Casagrande Builder Pvt. Ltd.There is an imminent focus on 'Housing for All, especially as the Government pursues a broad-based development across the rural and urban India. The decision to allow tax reduction on an additional Rs. 1,50,000 on interest on housing loans, shall boost the sector. The proposal to amend the tenancy law shall be instrumental in boosting rental models and attract more investors. Along with these, the Government's proposal to promote sustainable urban development through transport systems such as metro-rail networks shall provide a long-term boost for the housing sector.

Tanuj Choudhry, Chief Business Officer & Board Member, HomeLane

This year’s budget has announced encouraging developments for some segments of the start-up community in India. Bringing more companies with an annual turnover of up to INR 400 crore under the lower corporate tax bracket of 25% is an encouraging move and it will help many companies have better liquidity. We were hopeful that the government will abolish Angel Tax. However, the measures to ease scrutiny from the Income-tax department by the introduction of e-verification for investors will definitely ease many budding businesses. It is also reassuring that measures have been taken to carry forward and set off losses for start-ups and increase the period of exemption of capital gains arising from the sale of residential house for investment.” Good news is for affordable housing where home buyers buying units up to 45 lakh will get benefit up to 3.5 lakh and earlier it was only 2 lakh. So home buyers will get benefit in interest of home loan paid to banks. On a home loan of 15 years, homebuyers can save up to 7 lakh and it is a huge amount. Individual tax-saving limit is still Rs. 5 lakh and I think this is going to boost the demand for housing. Housing finance was a big concern of real estate and Govt. is now focusing on housing finance companies by bringing all under RBI is next level step to address the funding part. The budget was focused to boost infrastructure in the country which is important for real estate. One nation, one grid to ensure water, power and gas demand is the futuristic step. We are happy that earlier announcements continue for real estate be it to hike in TDS limit of rental income or LTCG or notional rental. Hope that govt. must find a way to assign industry status to real estate and provide single window clearance.

Dinesh Jain- MD, Exotica Housing

The budget was quite balanced for the real estate sector. We were expecting that individual tax limit will be increased beyond INR 5.00 lakh but govt. has decided to observe the response. But good news is for homebuyers who will get the extra benefit of 1.5 lakh on purchase of unit up to Rs. 45 lakh. This is a big push since home buyers were demanding more deduction on interest and govt. has fulfilled the wish of a large consumer segment. Hence overall benefit for a home buyer who is purchasing home with a home loan will be able to save almost 10.50 lakh per annum along with other tax saving schemes. Rest long term capital gain, TDS deduction and notional rent have been untouched so it is a big boost for home buyers. Still, I feel that govt. must think of stress fund and bring back ITC for real estate.

Navin Makhija, Managing Director, The Wadhwa GroupThe first budget announcement by the re-elected Government has brought some cheer to the real estate industry. Much on the expected lines, the government has announced to continue with its thrust for Affordable Housing. The Government aims to achieve its target of Housing for All by 2022 through Pradhan Mantri Awas Yojana (PMAY). This can be reiterated from the fact that it has sanctioned 80 lakh houses under PMAY Urban and an additional 1.95 crore houses proposed to be provided under PMAY Rural. The government has been consistent with its efforts in addressing affordable housing, be it giving infrastructure status to this segment in the previous budget to the exemption of Rs 1.5 lakh in income tax on home loans under affordable housing in this budget. This is a big move as it will benefit a broader segment of home buyers and increase demand going forward. In addition, the support of Rs. 1 lakh crore by Government to NBFCs will help solve liquidity crisis to some extent which will indirectly help the recovery of the real estate sector. The Government has also focussed on a firm infrastructure push by announcing Rs 100 lakh crore investments. This will certainly boost the real estate sector and also help in employment generation.

Rohit Kharche, Director, The Baya Company“The Union Budget 2019 has brought about the much-needed focus on the real estate sector and is a step towards its revival. The additional deduction of Rs 1.5 lakh in income tax on home loans will create a wider opportunity for home buyers thus providing an impetus to the real estate segment. The growing Indian economy has the need to further invest in infrastructure, digital economy and job creations and we are happy that the government has been making consistent efforts in that direction. The current budget has paved the path for several reforms that will be undertaken to promote rental housing and the renewal of current rental laws that are archaic, which has been long overdue. The real estate industry needs to be granted infrastructure status which will ensure easier access to institutional credit and help in reducing developers' cost of borrowing for affordable projects. However, it is reassuring to see the government’s persuasion and the constructive measures taken towards providing a thrust to affordable housing, promoting ease of living and eventually aligning to their long term vision of “Housing for all by 2022”.

Varun Manian, Managing Director, Radiance Realty Developers Ltd“The Real Estate and Infrastructure sector is one of the predominant growth drivers of our GDP and the sectors offer huge employment opportunities. Currently, we are far from making homeownership a reality for the vast majority of the hard-working Indian middle-class and at the same time, developers are burdened with slow sales and unsold inventory. We believe that this time, the union budget would have a positive impact on the sector with some measures to re-energize the sector, including; simplified and unified GST where buyers benefit, allowing PSU banks to extend credit to developers on merit (removing real estate from the red list), RERA approval timelines to be earmarked, singular definition of affordable housing for interest subvention and allow direct FDI into residential projects.”

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