After the presentation of the budget 2015 by the finance minister there are mixed reactions from the real estate circle. The real estate sector had high expectations of measures that would pump in some liquidity into the industry. But many critics opined that the budget is fairly positive with many development measures but as far as the real estate industry was concerned the residential sector was not given much of an importance that constitutes the major chunk of the revenue for the industry. The budget according to realtors completely ignored the residential sector of real estate and there is a full lack of any kind of push for the housing sector as the realtors expected a heavy cut on the rates of the interest rates among other factors which would have boosted the home loan procurement rate among the end users pumping in some liquidity to the industry.
The budget however announced the government’s intention of building six crore houses or residential units towards the scheme of “Housing for all by 2022” but failed to detail on it. Neither did the budget detail on the Sardar Vallabhbhai Patel Urban Housing Mission in terms of allocating the funds. The timelines, project locations, the instruments for funding and other factors were also missing.
Few critics however appreciated the measures to reduce black money for which the step was taken by introducing the “Benami Transaction Bill”. The budget proposed to incentivize the use of wired money rather than hard cash transactions which few feel would significantly impact real estate. The budget also states that punitive measures would be taken against concealment of assets including Benami properties.
In talking about the liquidity few others argued that although this would impact on the real estate market on the whole but it might have a negative impact on the investor segment of the country. They go ahead to say that notwithstanding the positive intent of the government the Benami Bill can drive away the investors and exit the market.
Another criticism that came from the realtors was that the budget does not mention about the plans and programmes of constructing 100 smart cities. The budget document according to many lacks to boost the key factors and the sector of the real estate industry. On the first place it does not talk about the promulgation of the REITs and the InvITs. But Mr. Jaitly proposed to rationalize the regime of capital gains for the sponsors exiting at the time of listing of units of REIT and InvITs and also announced the creation of six crore homes to meet the centre’s mission of “Housing for all by 2022”.
Others opine that although many macro factors were being looked into in the budget for a prosperous economic regime but the real estate sector was highly expecting for some compensatory measures for the lull in the last there years and as the sector was virtually gasping for more liquidity. The realtors were unhappy as the budget has nothing in it to cheer up.
Moreover given the burden of prevailing indirect taxes, stamp duty clearances, the high cost of borrowing for both the developer and the buyer, the real estate sector was hoping for some serious incentives among other measures to give a boost to the sector which the budget was devoid of. But many veterans feel that the government will make some announcements in this regard in the due course of the year.
The measure for the REIT regime is welcomed by many as the indications that tax pass through on REITs will be implemented and the experts feel that this has the potential to stimulate the REIT market in India which can release lower cost capital, increase the flow of liquidity and stimulate the next phase of enhancement of the urban infrastructure of India.
Considering all these factors many opine that the budget is positive and balanced as the proposal to rationalize the capital gains tax regime is a positive step and the simultaneous reduction in the corporate taxes will ensure higher investment in the realty sector.
*courtsey;Bangalore Property Review