The Union Budget 2017-18 is a much awaited one, considering that it comes against the backdrop of a challenging year for the real estate industry. There needs to be a balance between the demand and supply sides to ensure a surge in sentiment and investment opportunities. A boost in the sentiment is extremely important for fuelling the growth of the real estate industry. We expect the Budget to reflect fiscal discipline and to provide homebuyers some cheer in the form of increasing the prevailing interest exemption of Rs 2 lakh for a single home loan. We also expect a separate deduction limit for home loan principal repayment.
The Prime Minister has already offered a phenomenal incentive under the Pradhan Mantri Awas Yojana (PMAY) to home buyers during his year-end speech. However, the loan limits should be increased for major metros and made more realistic to bring in cities like Mumbai within the purview of this scheme. Continued emphasis on infrastructure should also be a priority in this subdued environment. There needs to be a focus on getting peripheral areas integrated with the mainstream cities to further push the cause of the affordable housing segment.
This has been one of the path-breaking budgets with far-reaching changes, especially for the real estate sector. It is positive that the real estate sector has come in the central spectrum of the Union Budget. This has come at a time when the beleaguered sector has been looking at measures to boost sentiments. The real estate sector, which was the hardest hit by the demonetisation move, will be one of the major beneficiaries of this budget. Prudence in fiscal discipline is welcome and will encourage the RBI to look at a lower interest rate regime that will provide the much-needed fillip to this stressed sector.
Increased focus on infrastructure, especially construction of new roads, improvement of existing roads and coastal connectivity, will go a long way to benefit the real estate sector.
Increase in allocation of funds under PMAY shows the focus of the government towards making ´Housing for All´ a reality by 2020. Providing infrastructure status to affordable housing, a long-standing demand of the real estate industry, will not only bring down the cost of financing, but will also open up additional avenues for developers to raise funds. We believe that the shift in eligibility criteria for affordable housing from built-up area to carpet area will increase the unit size by 20-30 per cent, and will offer home buyers the benefit of owning larger units. This will encourage real estate players to enter the affordable housing segment.
The move to reduce the tenure of long-term capital gains tax from three years to two years is extremely welcome and will help the marketability of real estate as an asset class.
Changes in the taxation aspect of JDA (Joint Development Agreement) will greatly encourage more land owners to partner with developers, which will benefit real estate developers and in turn will likely benefit the end consumers.