Union Finance Minister, Arun Jaitley, presented the last full budget by the running government before the general elections in 2019. While he managed to announce certain incentives for the affordable housing segment, the real estate industry was expecting a lot more. 99acres.com delves deeper into how the budget fared in terms of treading a fine line between fiscal prudence and the free-spending expectations ahead of an election year.
Push to affordable housing: Establishing an affordable housing fund coupled with the commitment to build 1 crore homes under Pradhan Mantri Awas Yojana (PMAY) in rural areas accentuates the dedication to ‘housing for all’ agenda by 2022. The government announced that more than 51 lakh affordable homes have already been constructed in rural areas and 50 lakh homes have been accomplished in urban areas. In FY 2018-19, the government has earmarked Rs 14.34 lakh crore for creation of livelihood in rural areas. Real estate and allied industries would greatly benefit from this ambitious plan.
Enhancing road and rail network: Expanding and safeguarding the road and rail network is a key priority for the government at present. Under Bharatmala project, about 35,000 km roads are due to be constructed under phase I with an expenditure of Rs 5.35 lakh crore. In addition, building 56 new airports, development of 600+ new railway stations will strengthen connectivity to backward areas and expand peripheral locations.
Push to railway capex: Railway capital expenditure set at Rs 1.48 lakh crore is an increase from last year’s budget of Rs 1.31 lakh crore. Addressing the security concern in railways is a crucial priority for the government. Towards this goal, elimination of 4267 unmanned rail crossings in broad gauge in two years has been announced. An allocation of Rs 11,000 crore and Rs 17,000 crore has been earmarked for Mumbai and Bangalore metro, respectively. Real estate across top metros and emerging markets would be the major beneficiaries after these developments.
Disinvestment: A disinvestment target of Rs 80,000 crore for financial year (FY) 2018-19 will free up landlocked parcels and open up new avenues for private developers. This will help in accomplishing housing for all as well. Any areas that were previously restricted for development will now open up pathways for new players to emerge.
Support to MSME industries: Extending capital support and subsidies to the micro, small and medium enterprises in the form of budget allocation of Rs 3,794 crore to the sector is a clear indicator of promoting these industries. This development will also aid in employment generation.
Income tax slabs remain unchanged: Budget 2018 disappointed the salaried class, who was anticipating a push in the investment limit under section 80C of the Income Tax Act. At present, the investment limit is Rs 1.5 lakh, and any increment on the same would have meant more benefits for homebuyers. However, the slab was kept unaltered which disappointed buyers paying EMIs on completed homes.
First-time homebuyers ignored: An increase in income tax exemption for first-time home buyers, who currently claim tax deduction up to Rs 50,000, had the potential of whetting the appetite of fence-sitters, thereby, proving a game changer for the real estate market. However, tax deductions under 80EE of the Income Tax Act was kept status quo.
GST on under-construction properties unaltered: While the Centre recently reduced GST on under-construction homes under Credit Linked Subsidy Scheme (CLSS) of PMAY scheme from 12 percent to 8 percent, the real estate fraternity hoped for a similar trim beyond CLSS. The move could have propelled housing demand for under-construction properties, which is languishing under 12 percent GST.
‘Industry’ status to real estate remains unfulfilled: The long-awaited demand of the sector for ‘industry’ status also remained unmet. The status could have aided developers apply for funds at lower interest rates, thereby, shrinking project costs, and translating into higher demand for homes. Lack of measures towards this end have pulled down sentiment.
Single-window clearance system unaddressed: The long and tedious process of approval for real estate projects have led to delayed deliveries and impinged on homebuyer sentiment. The sector has been awaiting a more streamlined, time-effective process, which could eliminate any scope for delays. With the government leaving the matter untouched, the developer community expressed disappointment.
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