Tag Archives: Budget and real estate

Election budget disappointing for homebuyers

Posted on by Track2Realty
Track2Realty Budget Special

News Point: The homebuyers across the major housing markets of India who were glued to the television sets for one hour and 50 minutes of budget speech by Finance Minister Arun Jaitley are left disappointed. 

Union Budget, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Ravi Sinha, Track2Media, Track2RealtyThe homebuyers who were expecting reduction in Income Tax limits, lower rate of interest on home loans, reduction of GST and Stamp Duty, interest in cap on interest and principal deductions are feeling cheated.

The hopes of middle class homebuyers have dashed and they blame the Finance Minister for presenting an election-oriented budget. Many even question the direction of the government where the focus has suddenly shifted towards the rural and farm sector in the last full budget presented by this government.

The sentiment of urban middle class homebuyers was immediately reflected with the Sensex that tanked immediately after the Union Budget 2018-19 took a ‘U’ turn from what was expected of this government. It is noteworthy that the stock market was going northwards in the morning ahead of budget speech in anticipation of sops for urban middle class Indians.

However, the fact that there was no relief for the salaried class with the Income Tax reduction and, added to it, the announcement of Capital Gains Tax dashed the expectations of the urban middle class who are a major demand driver.

“We have weathered hard measures like the demonetization and GST with the expectations that the Modi Government would encourage the honest tax payers in return. But it seems this government is no different than what has been a tried & tested Indian politics, that is announce sops for voters on the eve of elections,” says Swaraj Sehgal, an IT professional in Gurgaon.

“Was it a budget speech or election speech?” questions Namrata Chauhan in Mumbai. “Forget incentivising the tax payers with a home purchase that has a chain effect on the economy at a macro level, the budget has completely ignored the basic needs of middle class Indians across the major cities of India. When the government itself has revised its job creation target from 2 crore to 70 lakh now, it is very obvious that home buying capacity of Indians would take a hit,” explains this real estate consultant.

Budget mishits 

Income Tax paying urban middle class most disappointed with Union Budget

No incentive for home buying even though Finance Minister acknowledges contribution of salaried class

3.5 lakh crore more spending in this budget; no clarity over fiscal consolidation

Focus on job creation down from 2 crore jobs to now 70 lakh 

Realty shares up in the morning but tanked post rural focused budget and capita gains tax

Stressed on infrastructure creation but no clarity over budget allocation

First budget after GST implementation but no impact 

The developers too seem to be disappointing but no one is ready to be overtly critical. Ravindra Pai, MD, Century Real Estate agrees that there were a lot of expectations from the Finance Minister in this budget for real estate. “Unfortunately, other than some minor mention about a fund for affordable housing and increased allocation for smart cities there is not really anything for real estate or home buyers.”

“There are certain positives but more disappointments with this budget,” believes Nikhil Hawelia, Managing Director of Hawelia Group. “The Capital Gains Tax in the equity market might bring the well-to-do middle class back to the housing market. Ever since the slowdown in real estate, the capital market has been the biggest beneficiary. But I feel the reversal is quite possible now. Other than that, I don’t find very many positives to carry home in this budget.”

Though the Finance Minister has proposed that the government will set up a dedicated affordable housing fund in National Housing Bank, there is lack of clarity on the actual investments and expected impact. The same could be said about another lofty promise of one crore houses to be built under Pradhan Mantri Aawas Yojana in rural areas.

“There is too much talk about digital economy but my point is that whether we migrant professionals will live in the digital space or the house. In a city like Bangalore it really pinches to pay exorbitant rent but there is no incentive even though the Finance Minister in his budget speech acknowledges the fact that our contribution with Income Tax is more than self employed entrepreneurs. We are forced to pay taxes without any encouragement,” says Sudhakar Reddy, a finance professional.

Even the women homebuyers are not impressed with the symbolic announcement of employees PF Act to be amended to reduce the contribution of women to 8% from 12% with no change in employer’s contribution. They feel it would hardly make any impact as far as their purchase power is concerned.

“What I was looking for as a woman was some direct relief in creating an asset class like house. Does the government even understand the financial security aspect of women when offering symbolic reliefs? Similar is the case with relief to salaried taxpayers that propose to allow standard deduction of INR 40,000 in lieu of transport allowance and medical reimbursement. So, you snatched some of my fortunes to offer an alternative,” points out Kavita Jain in Delhi.

This has been the first Union Budget after the implementation of GST. Now that the dust over demonetization is also settled, the average urban taxpaying middle class was expecting a lot, more so in terms of its dream of home buying. But those expectations have been dashed and there is a feeling of being cheated among the middle class urban Indians for whom a house is the most cherished dream.     

By: Ravi Sinha 

Budget expectations for buyers & builders contradict

Posted on by Track2Realty
Track2Realty Budget Exclusive

Bottom Line: The homebuyers and the builders are not always on the same page as far as their wishes and expectations with the Union Budget are concerned.

Union Budget, Union Budget 2016-17, Finance Minister, Fiscal Policy, Fiscal Deficit, Monetary Policy, Budget disappoints real estate, Incentive for home buying, NRI investment, Track2Realty, India real estate news, Indian property marketA friendly budget is always on the wish list of everyone. Across the industries the stakeholders, including the consumers, have more or less the same expectations with the Finance Minister to call it a friendly budget. But in the context of the Indian real estate a friendly budget for the sector does not necessarily mean a homebuyer friendly budget.

The developers for some strange reasons have always been myopic when it comes to budget expectations. On the face of it, they won’t shy away demanding measure that would encourage the buyers. However, anyone closer to the power corridors in the Finance Ministry would be knowing how lobbying has always been for the long standing, often unreasonable, demands for the sector.

On the eve of the Union Budget 2018-19, the question is yet again the same. Whether the budget should be buyer friendly or the builder friendly. Are both the stakeholders on the same page this time around?

To understand this contradiction, let us first see what are on top of the wish list of the homebuyers. These are:   

Reduction in income tax slabs

Lower rate of interest on home loans

Reduction of GST

Stamp Duty reduction

Increase in cap on interest and principle deductions

Restriction on loss from house property 

Now let us see what a large universe of the developers is lobbying for. These are:  

Industry status

Capital for land investments in the affordable segment

Single window clearance/smoother approval process

Reduction of LTCG Holding Period for REITs

Ashish R Puravankara, Managing Director of Puravankara tries to balance the debate when he says that budget in itself a delicate affair, a tough balancing act of allocating necessary resources to every sector for a nation with such diversity and population. So, the best we can hope for that is something for everyone which is enough for both industry and buyers and no one feels excluded.

“Some the critical concerns with the developer fraternity will lie in the realm of policy implications, approvals and sanctions, and ease of doing business. For the homebuyers the concerns remain of price-points, developer reputation, quality of end product. While RERA may have abated some of these direct concerns, the larger picture of economic stability and also job security is where the common man’s hopes lie with the Union Budget,” says Puravankara.

JC Sharma, VC & MD of Sobha Limited admits that while the sector has seen some forward-looking reforms in the recent past, it still has concerns that needs to be addressed. One of them is the demand for industry status for the sector as a whole. In the Union budget 2017-18, the infrastructure status was conferred to only the affordable housing segment, not the entire sector. With the industry status, the sector will be able to secure funding for their projects at reasonable interest rates, which will spur new launches and better quality projects.

“It will enable developers to deliver projects on time as well. This will, in turn, augment well for employment generation, ‘housing for all’ and build the right eco system. Similarly, the tedious approval process for a project leads to delay in delivery of projects and increase the project cost in the range of 10 to 30 percent. Therefore, it is important to have a ‘single window clearance’, a long-waited demand of the realty sector,” says Sharma.

Aditya Kedia, Managing Director – Transcon Developers maintains that the buyers and the developers go hand in hand. If the Acts like RERA benefits the buyers it gives boost to the sector, increases transparency in the sector which ultimately benefits the sector altogether. The relaxation in income tax for first homebuyers, reduction in the HRA limit, high tax savings on home loan and home insurances are some of the much needed expectations from the homebuyers.

“The root cause of all the delays or cost overrun of various projects are somehow linked with the delay in approvals. Developers expect from the government to come up with some mechanism which makes the ease of doing business a reality for the sector. One Window Clearance and Digitization at larger scale in the sector is the need of the hour,” says Kedia.

The sector has been rhetoric with its oft repeated self-glory that real estate sector contributes significantly to India’s GDP with about 6-7 percent. The housing sector alone contributes around 5-6 percent to this. It also plays an important role in accelerating infrastructure development and capital investment. Further, there are claims that the positive effects of the sector are mirrored amply on the ancillary industries such as tiles, paints, fittings and fixtures, cement and steel etc.

More importantly, the sector claims to be the second largest employment generator in the country. This clearly reflects the critical role played by the real estate sector in driving the economy. Therefore, they assert that it is imperative for an ideal budget to focus on the sector where the impetus is on strengthening the ecosystem by taking care of the interests of developers and the buyers alike.

Unfortunately, in this argument and demand of the sector, the buyer is not at the core of the budget wish list. No one is bothered to address the pain point that the buyers are increasingly deserting the housing market. And the buyers have not much to expect in a financial eco system where de-growth in jobs is a big deterrent in home buying. If only the Finance Minister could address this, most of the issues of the buyers and the builders would be settled.

By: Ravi Sinha