by Santosh Sinha,
As the Finance Minister started his budget 2018 speech, whole India glued to the TV sets and other digital media to listen what he has to offer to the economy, the various sectors and ultimately to the common masses. However, there was one sector which watched it with great anticipation and this was the real estate sector, and rightly so. As the sector, which contributes more than 6 per cent to the GDP and is the second largest employment generator after agriculture, is facing a slump. It looked with great hope towards the Ministry of Finance and Honb’le Prime Minister and expected some kind of boost from the government. Unfortunately, the hope continues.
The sector demanded an industry status which could have solved the fund issue to a great extent. It further demanded the formation of a Single Window Clearance for faster approval mechanism. The sector would definitely be disappointed on these fronts.
It can safely be said that the announcements made in the Union Budget 2018 do not impact the real estate sector directly. However, there are few announcements that would help in creating a conducive environment for the sector.
Though, Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (InvIT) were introduced in India way before the NDA government came to power, the due emphasis is now being given to them. The Government and market regulators have taken necessary measures for development of monetizing vehicles. It would initiate monetizing select Central Public Sector Enterprises assets using InvITs from next year.
Moreover, the government also made considerable changes in Capital Gains Tax, reducing the interest rate to 10 per cent. This move will also have an impact on the real estate sector. This will accelerate the shift of preference from equity to other investment assets like real estate. This would be a reversal of the trend prevailing in the last five years. More investment could shift to real estate.
National Housing Bank
The government also announced amendment of National Housing Bank Act to transfer its equity from the Reserve Bank of India to the Government. It also announced amalgamation of Indian Post Offices Act, Provident Fund Act and National Saving Certificate Act and certain additional people friendly measures. These will help create a surplus for NHB to disperse for the development of Affordable Housing.
Going a step further, to provide the Reserve Bank of India an instrument to manage excess liquidity, government also announced amendment of Reserve Bank of India Act to institutionalize an Uncollateralized Deposit Facility.
Affordable Housing Fund
Government’s focus on providing Housing for All by 2022 continued in this budget as well. Last year, it awarded the Industry Status to Affordable Housing. This time, the government announced formation of a dedicated Affordable Housing Fund (AHF) in National Housing Bank, funded from priority sector lending shortfall and fully serviced bonds authorized by the Government of India.
To achieve the Housing for All by 2022 target, government had launched Pradhan Mantri Awas Yojana in rural and urban areas of the country. Under this scheme, government is developing 51 lakhs houses in year 2017-18 and 51 lakh houses during 2018-19 in rural areas. These sum up to the development of more than one crore houses exclusively in rural areas. In urban areas the assistance has been sanctioned to construct 37 lakh houses.
In, what can be called as a major move to rationalise the gap in income from sale and purchase of immovable property, the Finance Minister Arun Jaitley proposed that no adjustment shall be made in a case where the circle rate value does not exceed 5 per cent of the consideration value.
Currently, while taxing income from capital gains, business profits and other sources in respect of transactions in immovable property, the consideration value or the circle rate value, whichever is higher, is adopted and the difference is counted as income both in the hands of the purchaser and seller. This will have a positive impact on transaction of immovable properties in urban and semi-urban areas.
Smart Cities mission, another major ambitious program of Narendra Modi led NDA government, got a citation during the budget 2018 announcement. Arun Jaitley said that out of the targeted 100 smart cities, 99 cities have already been selected with an outlay of Rs 2.04 lakh crores. These cities have started implementing various projects like Smart Command and Control Centre, Smart Roads, Solar Rooftops, Intelligent Transport Systems, Smart Parks, etc.
He further said that projects worth Rs 2,350 crore have been completed and works of Rs 20,852 crore are under progress. Adding on to his announcement on smart cities, he said that to preserve and revitalize soul of the heritage cities in India, National Heritage City Development and Augmentation Yojana (HRIDAY) has been taken up in a major way. These announcements clearly indicate government’s focus on boosting PPP model to develop these cities.
A communication professional with more than 12 years of experience in real estate domain,Santosh Sinha has observed minutely every move of the sector so far. A strategist by profession, a writer by nature, Santosh Sinha loves to pen his thoughts, thereby allowing his readers to understand the nitty-gritties of Real Estate and get benefit out of it.