BUDGET 2017: IMPACT ON REAL ESTATE SECTOR
Year 2017 will bring in a paradigm shift in India’s real estate sector, as the new environment dawns with RERA and Demonetisation, guiding the industry to do a course correction. I am confident that there will be a shift in business procedures and this will bring in a new era in transparency and statutory compliance.We should expect a change in business attitude and it is my view that corporate restructuring also needs to take place. The builder-buyer relationship will itself undergo a phenomenal change and new standards will emerge.
In order to arrest the significant downswing in the real estate business, I feel there is a need for steps to be taken in the budget by the Government to boost the growth and also fulfil the dream of PM to provide “Homes forAll”.So the underlying question is “Will budget harness the strength of the common man by offering relief for home buyers and thus provide impetus to the growth of the otherwise sagging real estate industry?”.
Keeping the view that Government has already expressed its vision of housing for all by 2022 and to make it into a reality, a special stimulus needs to be injected into the economy which can help achieve objectives at a faster pace.Some of the steps which come to my mind are given in succeeding paras.
Industry status needs to be given to the Real Estate sector or some special/Infrastructure status at par with the industry which will bring about major transformation in the nature and the outlook of the Real Estate sector. This will be beneficial for the economy and the consumers as this will attract huge investments, big companies, shall inculcate corporate culture and industry discipline.
It is further suggested that the demand of housing to be treated as Infrastructure as they are engrossed in developing large scale projects which includes provision of water supply system, water treatment, sewerage, sanitation, solid waste treatment, laying of roads and to create recreational, educational, medical facilities as an integral part of development of satellite townships and in accordance with Government’s rules and regulations.
The tax benefits for home buyers needs to be further relaxed to include all home loans for first time buyers for interest paid up to Rs 3,00,000 and not be restricted to the value of Rs 50 lakh only.In addition the loan rate to be brought down to as low as 7.5%.
No doubt there is a huge requirement of affordable housing but it has been seen that the definition of priority housing has changed with ticket size of homes in the urban centres moving upwards to much higher than Rs 20 – 50 lakh. The Government needs to have a relook at meeting the expectation of this burgeoning urban middle class. This section will continue to grow and they will form the main pool of house buyers with higher loan paying capacity. I recommend that budget should cater for an increased deduction of an extra 100% of the interest payment made by the flat purchases to the financial institutions for a five-year period. This will drive down the effective rate of interest for the flat purchasers.
Another crucial area where the builders want help is in financing and towards that if the government could make available government-owned institutional financing to the priority housing projects, it would greatly enable private developers to participate in the same.
I am confident that the budget will herald new ideas which will bring more sunshine to the Real estate and help in regaining the lost stature of the industry.