Anuj Puri, Chairman & Country Head, JLL India
“While three of the real estate sector’s major expectations – increased HRA deduction, removal of DDT from REITs and boost to affordable housing by allowing 100% deduction on profits made by entities constructing them – have been addressed, the Budget offered no financial protection from project delays to home buyers.
- Most first-time home buyers in the major metros will be left out of the additional Rs. 50,000 tax exemption announced today, as it is applicable only on houses worth up to Rs. 50 lakh with loans of up to Rs. 35 lakh. This announcement will mostly benefit first-time home buyers in tier-III and tier-II cities.
- The biggest announcement with implications for the real estate sector in India was removal of DDT from real estate investment trusts (REITs). We expect a few listings to happen in the current year itself, either by financial institutions or developers. Currently, around 229 million sq. ft. of office space can be seen as REIT-compliant. If we assume that even 50% of these get listed, we are looking at a total REITs listing worth USD 18.5 bn
- The Budget has adopted measures to significantly step up NHAI capabilities. Roads infrastructure has great influence on real estate development, particularly with the new land it opens up for development through highways and feeder routes.
- Plan to revive underserved airports together with State governments will boost infrastructure in many tier-II and tier-III cities, and is without a doubt positive for their real estate markets.”
Kishor Pate, CMD – Amit Enterprises Housing Ltd.
While the Budget could have done a lot more for the real estate sector, there were some positives.
- The annual housing rent reduction limit has been increased from Rs. 24,000 to Rs. 60,000 leading to an almost immediate uplift for rental housing across major cities. This can potentially encourage sentiment for home ownership in the long run.
- First-time home buyers have been given the benefit of an additional deduction of Rs. 50,000 on home loan interest for loans not exceeding Rs. 35 lakh, where the value of the house is no more than Rs. 50 lakh. This will result in improved home buying sentiment in smaller cities with lower housing costs, such as Pune. An improvement in sentiment will also be seen in the far suburbs of the metros.
- However, this deduction is not sufficient to increase the sentiment much for first-time home buyers in central parts of the metros like Mumbai, where housing prices are exceedingly high and such an exemption makes little to no difference in the burden on home buyers.
The fact that the market indices took a nosedive immediately after the budget announcement more or less reflects the way sentiment in the housing sector has gone. However, if the RBI announces a cut in interest rates on the heels of the reduced fiscal deficit announced by the Finance Minister, it could be a day saver.
Arvind Jain, Managing Director – Pride Group
Budget 2016-17 was far below expectations. Some leeway has been given to first-time home loan borrowers, but the relief will not boost demand in the metros.
- Service tax has been exempted for developers focused on constructing affordable housing with unit sizes not exceeding 30 sq. meters in the larger cities and 60 sq. meters in the smaller cities. This is a significant plus, and in line with the incumbent Government’s intention to boost affordable housing.
- Allocation to MNREGA and irrigation activities have been stepped up, so it is logical to expect rural income to rise from this year onward. This can positively affect rural consumption story and boost the growth of smaller towns.
- Encouragingly, Rs. 1,500 crore has been allocated for the moderation of land records in the Digital India campaign, which will definitely have a positive impact on transparency in the real estate sector.
- On the retail front, permitting seven days of operation for small and medium-sized shops in the unorganized retail segment will allow them to compete more effectively with malls. This will boost the demand for retail stores on high streets significantly.
- The plans to revive in operational civil airports in partnership with their States with a rather small allocation of Rs. 100-150 crore per airport can have positive implications for the real estate development in these cities. It will boost infrastructure, and airports are also know influencers of demand for all categories for real estate.
All in all, this budget was exceedingly cautious and not enough to infuse any significant doses of vibrancy into the real estate sector.
