Before evaluating its impact, let us look at the major policy changes:
- Affordable Housing has been given infrastructure status.
- The Government is intending to construct 1crore rural houses by 2019.
- The carpet area of 30 and 60 sq meters for affordable housing will be applicable instead of built-up area of 30 and 60 sq meters.
- The developers will pay capital gains only in the year when the project is completed. This will give them tax relief on unsold stock.
- The holding period for capital gains tax for the immovable property has been reduced to 2 years.
- Developers will get a tax break of 1 year after the receipt of completion certificate for the unsold stock.
- The National Housing Bank will refinance Rs 20,000 crore loans.
- For development under AMRUT and Smart Cities projects Rs 9,000crore has been allocated.
Now let us judge the impact of these policies on various stakeholders of real estate sector:
Government:
- By giving Affordable Housing Infrastructure status, the Government’s objective of providing Housing for All by 2022 looks very much achievable.
- This will lead to increase in employment of people which would be good for the country’s economy.
- Tax Breaks and new Regulations like RERA and GST will make the sector more efficient and organised.
Developers:
- The newly-granted infrastructure status to the affordable housing has allowed the builders of budget housing now have access to cheaper sources of funds.
- This will encourage the developers to launch projects in this segment, where most of the demand lies.
- The tax incentives coupled with other benefits like the refinancing by NHB will help the sector by bringing additional supply being pumped into the market.
- The developers who have been severely affected by demonetisation – can now look forward to healthy growth.
- This growth will also be reflected upon related industries and on the overall economy.
Consumers:
- The end users will benefit maximum out of this budget.
- With tax benefit given to the income slab of up to Rs 5lakh, the dream of owning a home will soon become a reality for much more. In this was there would be a larger sale of affordable housing.
- Courtesy demonetisation, banks are flushed with funds. This will lead to further lowering of interest rates, making home loans more attractive.
- Due to all the above mentioned reasons, consumers will get homes at a lower cost as builders will be able to pass on the savings accrued due to long-term finance at lower rates of interest.
- If NHB refinancing comes in the form subsidy, home loan rates down by a significant 200 to 300 basis points. This would dramatically improve the consumer demand.
- But the budget:
- Failed to give Infrastructure status to the entire real estate sector.
- Did not give clarity on single-window clearances for housing projects.
- Did not provide additional tax incentives to first-time house owners.
Nevertheless, the budget 2017 has more positives than negatives for the real estate.