‘Depressing Budget for real estate’

Unless the quantum of this fund is big, Credai past national president C Shekar Reddy tells Telangana Today, it wouldn’t help the developers.

By Author   |   Published: 3rd Feb 2018   12:02 am Updated: 2nd Feb 2018   4:21 pm

Hyderabad: Finance Minister Arun Jaitley announced a dedicated affordable housing fund in its Budget, but the realty experts say more could have been done for the sector that is seeing stagnation in the past.

Unless the quantum of this fund is big, Credai past national president C Shekar Reddy tells Telangana Today, it wouldn’t help the developers. The sector has been lacking access to funds particularly 95 per cent of the small and medium developers in the country. Purchasers were expecting interest component rationalisation, which did not happen. There was nothing appealing in the income tax slab revision as well. There is no motivation for buyers.

He added, “A significant portion of the population still lives in rented houses. For first-time buyers, the Budget should have offered something. Developers in several cities are struggling as the market has been stagnant. Hyderabad has been an exception which has seen healthy trends in the last few months across all asset classes and more so in office space.”

Anshuman Magazine, chairman, India and South East Asia, CBRE says, there is some good news for the real estate sector. The establishment of a dedicated affordable housing fund under the National Housing Bank for priority sector lending will provide a further impetus to the development of housing in this segment.

From a taxation point of view, the increase in standard deductions to Rs 40,000 per annum will help individuals have more disposable income which could be channeled towards higher investments into real estate. It was hoped that this year’s budget would finally address the need to put in place single window clearance and accord infrastructure status to the sector.

Neeraj Bansal, partner and head, ASEAN Corridor and Building, Construction and Real Estate sector, KPMG in India, said, “The investor and corporate class were largely left wanting and proposals for the real estate and construction sector, which is currently witnessing considerable headwinds owing to weak demand and transformational reforms (such as demonetization, RERA, GST), are no different. Both the buyers as well as the developers were expecting much from this Budget in terms of improving the purchasing power of the buyers as well as simplification/ clarification on some of the key tax issues concerning the sector. Amendments were also expected on taxability of REIT structures to augment this alternate investment mechanism for the investors.”

Bansal adds, “As a specific measure, 5 per cent leeway in terms of taxability of difference between transaction value and stamp duty value vis-à-vis transfer of real estate property is a welcome move, however, the impact of the same may be minimal.”

Anuj Puri, chairman, Anarock Property Consultants, said, there is continued push for affordable housing with as many as 51 lakh houses in rural areas are to be built in 2018-19. The Budget addressed the anomaly under Section 43 CA to tax real estate transactions at their real value rather than the value arrived at by applying artificially higher circle rates.

As per new announcement, if the circle rate does not exceed 5% of transaction value, no adjustment is required towards the capital gains on a real estate transaction. It will help in terms of some extra savings if there is parity between the market rates and the ready-reckoner rates. Cities which are not under the heavy influence of real estate investors and where prices are rational may benefit from this announcement. Also, if the Government emphasises more on a definitive student housing policy, a new avenue will open up for the real estate sector.”