The Union Budget was announced in early February. Everyone was quick to notice that this time around, the budget focused heavily on agriculture and the farming community primarily. There were some commendable moves as well – the railways got the largest ever allocation at 1.48 lakh crore while the budget allocation for farmers being nearly doubled this time.
Most hailed the 2018-19 budget as one that has more hits than misses this time. It is certainly true that the budget did pack many surprises, with the biggest one being the part where Mr Jaitley declared that cryptocurrencies not be considered as legal tender in India (which experts believe is truly justifiable)!
Here are some aspects of the budget that were drawn out for real estate sector:
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Highlights For The Real Estate Sector
In his presentation, Mr Jaitley stated that if there is ever a group of people he feels most for, it is the middle class. And so all the decisions when it came to real estate were made with the average Indian in mind and to boost housing for the poor. Here are some of the highlights –
Affordable House Fund
According to Finance Minister, Mr Arun Jaitley, the Govt. will set up a separate and dedicated Affordable Housing Fund with the National Housing Bank. This will be funded by priority sector lending shortfall and by fully serviced bonds that would be authorized by the Indian Govt. The housing for all scheme is by far the most welcome move in this year’s budget for real estate.
Prime Minister Awas Yojana
This is an ongoing scheme focusing on rural and urban Indian, which aims to put a roof over every poor individual by 2022. The ultimate goal is to fulfil everyone’s dream of owning a house. In the year 2017-18, the scheme had been successful in construction over 51 lakh houses. In the following year, the scheme aims to construct an equal number, totalling over one crore houses in rural areas. For urban areas alone, 37 lakh houses have been already sanctioned.
Taxes
The Govt. has graciously introduced a 5% safe harbour in the regard of Stamp duty & registration charges. Although the figure is quite low, 5% is still a welcome respite from undue hardships of suffering the difference between the transaction value and stamp duty value of properties.
In addition to this, the tax introduced in the previous year on notional rent (applicable to unsold inventory) has been revoked. That too has been revoked seeing that it had a ripple effect on the end consumer and not just the developers.
Apart from this none of the other taxes that were expected – concessional GST for housing sector, regularization of stamp duty to 3% or change in capital gain tax window on Real Estate Investment Trusts or even change in income tax slab got covered significantly. Despite industry experts stressing ahead of the budget announcement that REITS and InvITs are not merely instruments to investments but solid alternatives to capital market, the budget has failed to issue anything favouring REITs.
And too miff investors further, it has been proposed to collect tax on long-term capital gains from equity funds. This means that investors will get lesser returns than what they anticipated. This also affects the implementation of REIT and it now seems that it is just a distant dream.
Expectations For The Year
In totality, the picture presented is fairly balanced. Although it is disappointing to see the Govt. fail to bestow an “industry” status on real estate, with all the schemes to boost affordable housing, the sector is definitely going to see a boost.
The new deductions will have salaried individuals breathe a sigh of relief as they are the main buyers in this space. The increased use of digitisation will also bring about more transparency to the sector often touted to be otherwise. However, all in all, nothing very commendable has been done, aside from the heavy focus on affordable housing.
Despite all the speculations and backlash at not having done more, industry experts still claim that 2018 will be a good year for investing in real estate. Much growth and expansion are expected to happen in 2018-19.
If you’ve got inputs on this topic or if you feel you have a valuable comment on how the average Indian can make best of his means, do let us know in the comments below. Thank you for reading, cheers!