Latest Real Estate News Delhi, India - Real Estate market in india [Valid RSS]

Share This Post

RM Reports

Union Budget 2019 Boost To Real Estate: Affordable Housing Gets New Lease Of Life

Government proposes an additional exemption of Rs 1.5 Lakh on interest amount on housing loan up to Rs 45 Lakh. The budget also allows FIIs and FPIs to invest in NBFCs, thereby, giving NBFCs a new lease of life.

Nirmala Sitharaman Finance minister union budget real estate realtymyths

Union Finance Minister Nirmala Sitharaman, while presenting her maiden budget and the first budget of Modi 2.0 government, announced an additional rebate of Rs 1.5 Lakh on Housing Loan Interest. Being considered as a big boost to the real estate sector, this step will encourage first-time homebuyers and will enhance sales. Currently, this rebate was limited to Rs 2 Lakh only. So with this announcement, a housing loan for a home valued up to Rs 45 Lakh, the homebuyers will now avail a rebate of Rs 3.5 lakh on the home loan interest amount. This benefit will be available for home loans taken till March 2020

The Finance Minister also proposed some relief to non-banking finance companies that are facing a crisis of confidence after banks showed reluctance in lending them following the recent IL&FS crisis. The Union Budget has proposed that foreign institutional investors and foreign portfolio investors will be allowed to invest in debt securities by the shadow banks. This will allow the NBFC sector, facing a liquidity crunch, to raise more funds. NBFCs, particularly the housing finance companies, are one of the major sources of funds to the real estate sector. With this kind of bailout, the NBFCs can now breath fresh air and reinstate their business.

The real estate sector has been reeling under immense pressure which emerges out of the two basic reasons, decreasing sales and increasing funding crisis. This budget tried to address both the issues, giving the real estate sector many reasons to cheer. Mr. Anshuman Magazine, Chairman and CEO, India, South East Asia, Middle East, and Africa, CBRE, termed it as a futuristic budget and said, “The government has announced a progressive budget which will go a long way in the creation of a well-balanced and empowered economy”. 

Mr. Kapil Sharma, Partner, Lakshmikumaran & Sridharan Attorneys, says, “The Hon’ble Minister of Finance, Ms. Nirmala Sitharaman, in order to boost the ailing real estate industry has made several announcements in the budget speech. At the forefront, the definition of the affordable housing under Section 80 IBA of the Income Tax Act, 1961 has been amended in line with the amended GST provisions allowing a 100% deduction to developers on profits and gains from housing projects. To incentivize the purchase of affordable houses, the home buyer would be allowed deduction of the interest paid from on loan is taken in respect of residential house property of stamp duty value up to 45 lakh rupees. To add on to the above boosting measures, the holding period for long-term gain on the immovable property has been reduced from 36 months to 24 months”.

Speaking about incentives offered to the real estate sector, Dr. Niranjan Hiranandani, President NAREDCO, explained that was a need to promote rental housing and housing for all by the year 2022. “The government’s idea to provide affordable housing will be a possibility and is highly successful in almost all the cities except Mumbai where there is a paucity of land. I believe that the additional incentive of Rs 1.5 lakh on interest on loans borrowed under the affordable housing would give a boost to the real estate sector further. The government’s proposal to invest more than Rs 100 lakh crore for infrastructure over the next 5 years is also a welcome move”.

Emphasising that the developers also need to align themselves with government’s objective, Mr. Mohit, Bhambri, Co-Founder, Hedge Homes, said, “The Government took the initiative to address the affordable housing with only 13lakh homes constructed so far out of 81 lakh homes under PMA, since there is an increase in threshold value numbers from 25 % – 35% Under PMA-2, it is likely to meet the demands of successful tax reforms, the real estate sector is likely to grow based upon this data, However, to meet the Numbers the real estate sector and the players of affordable housing needs to adapt this quickly.”

Sharing his views on the Union Budget 2019, Mr. Navin Makhija, Managing Director, The Wadhwa Group, said, “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 an 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”. Assessing government’s decision to support NBFCs and terming it as a much-required step, Mr. Makhija further said, “Also 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”.

Echoing similar views on the Union Budget 2019, Mr. Avneesh Sood, Director Eros Group, said, “The steps to provide impetus to the housing sector would have a multiplier effect on GDP growth given the sector’s significant economic linkages, a deduction of Rs 150000 on interest on loans borrowed under affordable housing will help boost the demand of Housing for All by 2022.  Also, the allocation of Rs 100 lakh crore investments for infrastructure over 5 years is also a welcome move to put India in a high trajectory that will make it a $5trillion economy by 2024-2025.”

Smt. Sitharaman also discussed the need to form a new and modern tenancy law to regulate the financial relationships between the owner and the tenant of a house. Welcoming this step, Mr. Ajit Panda, Founder, Spaciya Advisors – real estate consultancy firm dealing in B2B segment of commercial real estate, said, “We welcome the Finance Minister’s resolve to replace the archaic tenancy laws and place a modern and contemporary legal framework. This will help in organizing the real estate as a bankable asset class for annualized returns and will pave the way for large scale professional investments into the sector”.

Mr. Honey Katiyal, Founder & CEO, Investors Clinic, said, “The proposal to bring reforms in the current rental housing norms will definitely balance the relationship between both landlords and tenants. This will further make the Indian rental market organized and transparent across the country”. He also said, “REITs have already transformed the commercial market and with the proposal of Foreign institutional investors to subscribe in REITs and INVITs will again boost the market like never before. Apart from this, the government’s proposal to improve the transit-oriented developments (ToDs) across the country will help in the emergence of new commercial and retail hubs in the country that will definitely be a big booster for the complete real estate sector.”

The government also proposed a complete Income Tax rebate on taxable income up to Rs 5 Lakh. Clearly, when put together with the other two steps taken to boost affordable housing, this is going to be a game-changer for the real estate sector in days to come.  And why not, the government appears firm on achieving its target of Housing for All by 2022, and for that to happen, Modi 2.0 needs to encourage affordable housing.

Share This Post

Leave a Reply

Please wait...

Subscribe to our newsletter

Want to be notified when our article is published? Enter your email address and name below to be the first to know.