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Budget to boost real estate, housing

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  3 Feb 2017 12:00 AM GMT

By Vinod Behl

Living up to the expectations of industry and the intent and commitment of Prime Minister rendra Modi government towards ongoing reforms, the tiol Budget 2017-18, targeted at the poor and middle class is well meaning, investor-friendly and stimulating, especially for the realty sector.

The budget provides a big booster dose to the real estate and housing sector, otherwise bogged down by severe fund crunch holding up projects, together with slump in housing sales. It boosts up the confidence of both the consumers and the investors.

The budget can be seen in the backdrop of government’s firm faith in the capability of real estate and infrastructure sectors to provide the necessary boost to the overall economy, especially to realise the objective of ‘housing for all’, the flagship programme of the government to rejuvete the economy.

To give fillip to the housing sector, particularly affordable and low-cost housing, the budget has undertaken a significant policy measure to give infrastructure status to affordable housing. This could be termed as the biggest policy initiative after the historic reform undertaken by the government in the form of Real Estate Regulation Act (RERA).

This is a big relief for fund-starved developers, who will now be in a position to get easy and cheaper institutiol fince from domestic and overseas sources. Further, the abolition of FIPB is another big step to boost the confidence of foreign investors about reform process and the ease of doing business.

Long-term capital gains tax benefits on housing, which can now be availed after two years instead of three, will make real estate as an attractive asset class for investors. This, in turn, will boost the supply of affordable urban housing. The hike in outlay for rural housing from Rs 15,000 crore to Rs 23,000 crore under the Pradhan Mantri Gramin Awas Yoja (PMGAY), will give a thrust to construction of 10 million rural houses by 2019.

The budget has other related provisions to boost housing supply. Keeping in view the large number of stalled projects, the time-line to complete affordable housing projects, has been raised from three to five years. The budget has also made additiol refince of Rs 20,000 crore for tiol Housing Bank which will also help boost housing supply. Similarly, the much awaited clarity on taxation on joint developments will cut disputes and give a push to projects execution and in turn boosting supply.

Realising the significance of infrastructure in providing impetus to real estate, the budget has made a record allocation of Rs 3.96 lakh crore on infrastructure development. Budgetary support for tiol highways has increased to Rs 64,000 crore. The rural road construction target has been almost doubled. The new Metro Rail policy, focusing on innovative fincing and execution, will also improve connectivity, thereby boosting real estate.

This year’s budget is historic in a way that it’s out-and-out pro-consumer. Having already provided the protection umbrella to property consumers by way of realty regulator, the government, through the budget, has made several far reaching provisions to boost consumer confidence and push consumption.

The increase in persol income tax limit with additiol benefit in tax slabs, will give more disposable income in the hands of home buyers, thereby spurring home sales. The extension of tenure of loans under the Credit Linked Subsidy Scheme (CLSS) of PMAY, from 15 to 20 years, is a great sentiment booster for consumers.

The budget has also enlarged the net of affordable housing to bring more people under its ambit by modifying the eligibility criteria of house sizes of 30-60 mts with built-up area to carpet area, within the municipal limits of four big cities. The capital gains tax relief will encourage more transactions through transparent banking channels, boosting the confidence of property buyers.

The provision on joint development may well ease land prices to benefit consumers. The availability of cheap fince to developers with the granting of infra status to affordable housing, will reduce cost of construction, which the developers may pass on to consumers.

With all its positives, the budget however, did not meet the industry expectation of providing tax incentives to first-time home buyers, giving higher tax reduction on housing loans and increasing house rent allowance limit. The industry’s wish of granting infrastructure status to entire housing sector, was only restricted to affordable housing but rightly so as the maximum housing shortage is in affordable/low cost housing.

There was also no announcement about much desired single-window clearance system but then that may well be part of the post-budget policy initiatives. But all said and done, the budget, reflecting predictability and continuity of policies, promises an early revival of real estate, particularly housing sector, paving the way for a healthy and sustaible growth of not just real estate but allied sector as well. (IANS)

(Vinod Behl is editor, Realty Plus, a leading real estate monthly. The views expressed are persol. He can be reached at

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