Impact of Budget 2017 on Residential Real Estate market
May 23, 2017 Real Estate News
With the help of proactive policy changes in the recent budget, a lot of excitement has been created in the in the real sector, which has been badly suffering for the past few years.
Before evaluating its impact, let us look at the major policy changes:
Now let us judge the impact of these policies on various stakeholders of real estate sector:
Government:
Developers:
Consumers:
Nevertheless, the budget 2017 has more positives than negatives for the real estate.
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.
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