The government renewed its commitment to affordable housing by extending the tax holiday by a year, but the Budget offered little to resolve the liquidity crunch facing the housing sector nor did it make loans attractive, which could have boosted homebuyers' sentiment.
Developers expressed disappointment with the Budget, saying it failed to address liquidity concerns of the sector and did not provide any major incentives to boost sluggish housing sales.
“We expected bolder steps from the government to revive the ailing sector. The Budget 2020 needed steady fiscal invigorating measures, focusing on demand creation,” said Satish Magar, President, CREDAI National.
The Budget has no direct impact on real estate, focus continues on infrastructure and revival of consumer demand, said Ramesh Nair, CEO & Country Head, JLL India.
“The Budget announcement continues to focus on affordable housing and infrastructure, more specifically, urban infrastructure and logistics. However, we do not see significant impact on the realty sector,” he said.
The Budget falls short of real estate sector’s expectations, said Shishir Baijal, Chairman & Managing Director, Knight Frank India.
“Lowering of income tax rates with removal of exemptions, may not lead to any meaningful boost to consumption. As far as the real estate sector is concerned, the industry was hoping that the government would come up with measures to boost housing demand. However, the removal of exemptions under the new income tax regime, implying no tax benefit on principal and interest for home loans would be a dampener for the sector,” he said. Positives in Budget 2020
Emphasis on ‘Study in India’ It seeks to provide a boost to student housing, which is set on a higher growth trajectory. Private sector policy on data centre JLL estimates $4 billion investment opportunity for data centres parks in the country.
National Logistics Policy According to JLL India, the National Logistics Policy and viability gap fund for warehouses will provide impetus for increasing warehousing supply. The supply is expected to rise from 211 mn sq ft in 2019 to 379 mn sq ft in 2023 and the net absorption of 36 mn sq ft in 2019 will get further boost.
NBFC eligibility
The Budget reduced from Rs 500 crore to Rs 100 crore an NBFC eligibility for SARFAESI Act.
This seeks to empower more NBFCs to recover funds in stalled real estate projects and provide opportunity for funds to invest in stressed assets, said Nair.
This will prove to be helpful in addressing the liquidity situation in the industry and is expected to improve sentiments among the financial institutions and credit options for big and small developers, said Anshuman Magazine, Chairman & CEO-India, South East Asia, Middle East & Africa, CBRE.
Enhanced focus on infrastructure As much as Rs 1.7 lakh crore allocated to transport infrastructure, including railways.
The Budget says that Delhi-Mumbai and Bengaluru-Chennai expressways will be completed by 2023.
The government will provide 20% equity for the Bengaluru Suburban Transportation Project and 100 more airports will be developed by 2024. Five new smart cities have also been proposed.
Affordable housing Extension of benefit under section 80EEA to avail additional Rs 1.5 lakh interest deduction on home loans for first-time homebuyers has been proposed in the Budget 2020. This benefit can now be availed till March 31, 2021.
“Considering that a majority of home buyers fall in the lower and mid-income segments, this tax benefit will boost demand substantially. Will significantly benefit first time home buyers who will enjoy the benefits of interest subvention under the CLSS scheme and the extended tax benefits,” said Nair.
The Budget has also proposed time extension to claim 100% tax deduction on profits from affordable housing projects until March 2021 under section 80IBA. This extension in the dateline will ensure continued interest of developers in affordable housing.
Major misses A hike in the Rs 2 lakh tax rebate on housing loan interest rates under Section 24 of the Income Tax Act could have kick-started healthier demand for housing, especially in the affordable and mid-segment categories. But there was no announcement in this regard, said Anuj Puri, chairman, ANAROCK Property Consultant.
The Budget missed any major announcement for easing liquidity in the real estate sector–a major worry for most developers. Project delays, the biggest fallout of the cash crunch, have severely dampened buyer sentiments. There was a dire need to address this concern immediately, he said.
The Budget also did not announce any measures pertaining to implementation of land reforms. The lower 15% tax rate for companies looking to set up new factories can be applied only if they can acquire land easily. Further, bringing greater transparency to outdated land records system would have attracted more foreign investors and limbered up the approval procedure for real estate projects.
"The sector's key demands such as allowing restructuring of loans, extension of a subvention scheme, raising the limit of Rs 45 lakh for affordable housing, scrapping of capital gains on the sale of properties, extending the timeline of capital gains, are not met with," said Rajan Bandelkar, President, NAREDCO West, and Director, Raunak Group.
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