Much on the expected lines, though this year’s budget presented by the Finance Minister of India Arun Jaitely does not unveil any big bang measures to give a giant push to the beleaguered real estate, yet the budget 2016 aimed at revitalizing economy, triggering investment through a series of reform measures, spurring infrastructure and boosting affordable housing, provides a sigh of relief to the real estate sector. In the absence of any largesse and quick fix solutions, the budget may look disappointing, but it is perfectly in line with government’s philosophy that real estate should grow on the strength of economy and follow the path of long- term, sustained and inclusive growth.

As infrastructure holds key to the growth of real estate, as expected, the budget made a record allocation of Rs 2.31 lakh crore for roads,highways and railways, besides focusing on green field ports and up gradation of unused and underutilized airports and air strips. As the trigger to start investment cycle has to come from public spending, the budget has rightly focused on spending on basic infrastructure construction through multi- pronged strategy of establishing Rs 4000 crore National Investment & infrastructure Fund, a dedicated LIC Fund to provide credit enhancement to infrastructure projects, revitalizing PPP mode of infrastructure development and revamping dispute resolution mechanism The focus on public capital expenditure, is expected to help crowd in private investment.

The budget is fully seized of the ground real(i)ty that while commercial office real estate is on recovery path, residential real estate is still under lot of stress. Therefore, it lays emphasis on strengthening housing sector in line with government’s mission of ‘Housing for All’. And since most of the housing shortage is in low cost housing, the budget rightly stresses on affordable housing. To boost supply, the budget has incentivized private developers by making provision for 100 percent service tax exemption for affordable homes with sizes up to 30 sq metre in metros and 60 sq metre in non- metros. In order to encourage timely delivery of homes, the government has put a condition that developers can avail tax benefit only if they complete construction within three

On the demand side, the budget has provided additional rebate of Rs 50000 p.a on housing loan interest for first time home buyers in affordable segment, with loans not exceeding Rs 35 lakh and property value not exceeding Rs 50 lakh (though it is on the lower side in metros to realize full potential). The hike in the limit of deduction for rent paid under Section 80 GG of IT Act, will positively impact rental demand for affordable housing. The exemption of REITs from Dividend Distribution Tax (DDT) will also give a fillip to affordable housing.

Considering that rental housing can play an important role in the success of ‘Housing for All’ (the campaign started by the Prime Minister of India Narendra Modi) the budget has provided a much needed boost to it by hiking the HRA limit from Rs 24000 to Rs 60000 crore per annum for rented accommodation. Further, with government firmly sticking to 3.5 percent fiscal target, going forward, the budget will provide enough head room for reduction in interest rates for home loans to boost housing. Already, in order to boost low cost housing, home loan takers are getting interest subsidy of 6.5 percent on loans up to Rs 6 lakh for EWS through credit- linked subsidy component of,‘Housing for All’. And now in the budget, the lowering of corporate tax (for FY 18) for companies with below Rs 5 crore turnovers will boost housing finance companies focusing on LIG/EWS segment.

The budget has also addressed the important issue of bringing home prices within the reach of masses. Though, the government has not hiked the IT limit, yet hike in HRA limit and provision of standard deduction of Rs 24000 p.a for those not availing HRA, will push up disposable income to enhance affordability. The service tax exemption to developers undertaking affordable housing will help cut down the housing cost. The extension of excise tax waiver from Concrete Mix to Ready Mix Concrete will also reduce cost. The abolition of DDT for REITs will help access cheaper funding, thereby resulting in cost reduction. All these measures will provide a fillip to housing, particularly affordable housing. The corporate real estate, on the other hand, will get benefited with the announcement extending sunset date for exemption of fiscal incentives to SEZs to March 2020. The commercial office sector will further get propelled with boost to REITs.

Since liquidity crunch has been the biggest bane of real estate sector, it was expected that the budget will address this crucial issue. But in view of the poor health of banks, it was not justified to accord industry status to real estate to access cheap bank funding. However, with government taking effective measures on reviving ailing banks like allocation of Rs 25000 crore for recapitalisation of public sector banks, one can expect inflow of bank capital to developers in the times to come. But by making REITs attractive for investors, the budget provides opportunity to fund- starved developers to raise capital. The service tax exemption to affordable homes will improve viability of such projects, making it easier for developers to attract private domestic and foreign investment. The decision to deepen corporate bond market will prove to be a shot in the arm of private

With this year’s budget, the government carries forward its reform process to boost realty, that started with liberalising FDI (Foreign Direct Investment) norms to boost affordable housing, allocating huge funds for urban infrastructure projects, reviving SEZs and bringing housing for economically weaker sections and slum redevelopment under CSR (Corporate Social Responsibility) to provide impetus to low cost housing. The provision made in this year’s budget for digitization of land records will improve transparency, thereby boosting the confidence of property buyers and investors. This will also expedite the process of land acquisition, thereby checking delivery delays and cost escalation. The announcement to set up 300 Rubran clusters is another positive reform to boost realty. The budget has however partially addressed the issue of introducing single- window system, to check long delays in project approval due to multiple authorities, by enacting changes in Companies Act 2013 and revamping existing procedures and processes through tech intervention. The government is quite serious and focused on getting two crucial reform bills of Real Estate Regulation & Development Bill and GST Bill (currently stuck in Parliament) passed, in order to introduce single, uniform tax regime and empower property consumers and investors by providing a fair deal by setting up regulatory authority.

All in all, it is a positive budget that is set to boost the sentiment of the real estate sector. Though the sector reeling under slowdown, had hoped for much more relief, yet, there is enough on platter to induce home buyers and developers, taking real estate forward on road to revival and sustained growth.

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