The much awaited Union Budget 2017-18 has been finally announced and has scored high in terms of impressing the countrymen, with the realty sector making the most out of it. This being the third extensive Budget presentation by the current government, and first after the recently concluded 50 days of Demonetisation, the government was observed to be pro-active in terms of offering incentives and rebates to the people. The New Year Eve of 2017 saw incentives announced for the affordable housing segment which was followed by the banks declaring lending rate reductions very next day. Teasers about positive changes in the personal income tax structure were making rounds well ahead of the Budget day too. By granting infrastructure status to the affordable housing segment, reducing the tax rate for the initial slab and big plans laid for the infrastructural development of the country, this Union Budget has expressed its road ahead for the realty sector of the country which will now bet big in near future. As predicted, a common man's Budget has been presented and this is expected to bring about a transformation in the economy.
Key Economic Highlights:
- CPI inflation dropped to 3.4 percent from 6 percent.
- Trade deficit dropped from 1 percent of the GDP to 0.3 percent of the GDP.
- FDI increased from INR 1.07 lakh crore to 1.45 lakh crore.
- Forex $ 361 Billion which is equivalent to sustain 12 months of imports.
- GDP stable at 7.3%.
- Revenue Deficit stands at 1.9%
Key Hits from the Budget:
- Infrastructure Status accorded to Affordable Housing also redefining the unit sizes of 30 sq. mtr. and 60 sq. mtr. from built up area to carpet area. Projects in the direct municipalities of the four metropolitans to be considered for 30 sq. mtr. capping, rest all regions to have the capping at 60 sq. mtr. for affordable housing.
- Affordable housing projects to be awarded a completion time of 5 years from launch as against the previous tenure of 3 years.
- Developers to get one year's time to pay tax on notional rental income on completed unsold residential inventory.
- Tax benefits to the middle income group providing tax rate cuts of 5% for people in the income slab of INR 2,50,000 to INR 5,00,000. Additional reduction of INR 2,500 for people earning INR 3,00,000 annually making their total tax component zero. Reduction of INR 12,500 allowed on the final tax figures of remaining slabs.
- Income Tax rate for MSMEs with turnover upto INR 50 crores reduced to 25% from the earlier rate of 30%.
- Pradham Mantri Gram Awas Yojna to build 1 crore houses by 2019. INR 23,000 crores allocated for this financial year compared to INR 15,000 crores in the last financial year.
- Pradhan Mantri Gram Sadak Yojna allocated funds of INR 19,000 crores which will cumulatively amount to INR 27,000 crores with the contribution from states.
- INR 64,000 crores allocated for Highways against last year's INR 57,676 crores. This would also include 2,000 Kms of coastal connectivity which have been identified.
- A total of INR 3,96,135 crores have been allocated towards infrastructure development which is the highest in history.
- Airports in smaller towns to come up on PPP model.
- FDI norms to be further liberalised and online application to be enabled for FDI. FIPB to be abolished.
Key Misses from the Budget:
- Industry status for the real estate sector.
- Single window clearance system not yet operational Pan - India.
- No changes in the exemption limit for income tax.
- No changes in the savings or investments cap.
- No cushion for the reduction in the rate of interest on loans borrowed by developers for building projects.
- No major benefits announced for the allied industries like steel, cement, iron, sand, etc. that serve as the backbone for the raw material needs of the realty sector.
Avneesh Sood, Director, Eros Group - The government has yet again presented a Budget that will bring about a cheer to the masses. From favourable changes in the personal income tax structure to heavy investment plans for the infrastructure along with the according of infra status for the affordable housing segment and so much more, real estate sector is sure to directly and indirectly benefit from this budget in the near future. Amongst the big decisions, an outlay of almost 4 lakh crore has been planned for infrastructural development across the country, no tax for earners upto INR 3 lakh a year and no property tax for developers on unsold inventory till one year after completion certificate is issued. With such announcements, we are projecting the demand for budget housing to multiply that will also allow a positive drift in the momentum for the realty sector.
Deepak Kapoor, President CREDAI-Western U.P. & Director, Gulshan Homz - Announcement of infra status for the affordable housing segment in the Budget will open up new avenues for the developers planning to offer budget housing units and will make it easy and comfortable for them to get finance from lending agencies. Affordable housing developers will now be eligible for various government incentives and subsidies, where this infra status could also mean that the government might come out with land parcels for such development in future. With the basic slab of income tax now reduced to half the effect, people will have access to higher disposable income which can now be utilised for saving and investment purposes, where real estate will look attractive. Also, to promote foreign investment in the country, FDI is planned to be liberalised further.
Rakesh Yadav, Chairman, Antriksh India - The popularity and acceptance of this budget was clearly visible for the realty sector as we saw the real estate stocks driving the day in the share market. The decision of granting infra status for the affordable housing segment along with the rebate in personal income tax announced by the government will provoke the developers to shift their gears and develop affordable housing projects; which is now sure to meet the demand as well. One major issue faced by various builders across the major Tier 1 cities of the country is the inventory pile up. The tax break up of one year post the receipt of the completion certificate for the project, for the unsold stock, offers a slight breather for the builders. Overall, this budget looks quite favourable for the realty sector and its buyers in the long run.
Rajesh Goyal, Vice President CREDAI-Western U.P. & MD, RG Group - As anticipated, a populous budget has been announced by the government which will allow the young generation to save more and invest further. This budget saw the government offering several benefits to the realty sector, at the same time missing out on a few important decisions. Single window clearance system is still not implemented across the country which is hampering the delivery schedule of the developers. Amongst the major hits, the criteria for affordable housing has been changed from built up area to carpet area basis. This will allow affordable housing segment to look more lucrative for both, developers and buyers. With the income tax rebate for the first slab and affordable housing incentives in place, we will now observe the youth of the country looking out at realty sector as an avenue for investment or residing.
Abhishek Bansal, Executive Director, Pacific Group - With today's budget announcement, the affordable housing segment and the retail industry will see the biggest boom. The moment tax structure is simplified and relaxed, the spending power of people increases and this spending is directly contributed towards either savings or investments. Although, the young earning age in India is expected to spend and invest more rather than save, thus retail industry will witness increased footfall in the upcoming financial year. Real estate sector on the other hand, will benefit from the affordable housing development and hence, developers will now be eager to plan accordingly. Buyers interest will now shift towards low budget houses as these units will now come with a reduced price tag with the developers gaining access to easy finance from lenders; well supported by recent rate cuts and announcements.
Ashok Gupta, CMD, Ajnara India Ltd. - With a mammoth budget investment plan for the infrastructure of the country announced, various untapped regions will gain connectivity with major cities. This development will further broaden the avenues for realty development across the country. Affordable housing has yet again been the prime target of the government as it looks to fulfil the dream of housing for all. With the initial tax slab relieved and infra status announced for the affordable housing segment, upcoming project launches will witness majority of affordable projects. In a nut shell, this budget will provide a massive thrust to India's realty sector which has been picking up pace gradually over the years.
Ashwani Prakash, Executive Director, Paramount Group - Union Budget 2017-18 was likely to give some respite to the realty sector and it was highly expected that this sector might get industry status this year, but this has not happened. However, the FM has still taken an appreciable step in giving infrastructure status to affordable housing and increasing the scope of the same. The decision of increasing the period of completion for affordable housing projects from 3 to 5 years is also a welcome move. Reduction in interest rates for home loans is already in place, relaxation in the individual tax limit would also encourage the home buyers to come forward.
Pradeep Aggarwal, Co-Founder & Chairman, Signature Global - Driven with the view to provide houses to all at affordable rates, government's move to grant infrastructure status to the affordable housing segment in the country along with the relaxation especially in the first slab of the personal income tax will not only spur growth in the construction of affordable housing but also enhance the demand for the same. As the disposable income increases, people will be inclined to invest towards property. With the lending interest rates lowered and purchasing power increased, we will witness a steep rise in affordable housing demand across the country, which will now be well met with the upcoming supply.