Bottom Line: The rate cut ahead of Union Budget 2017-18 has raised hopes that the policy makers are working on more bonanza for the homebuyers.
There has not been any precedence of major interest rate cut ahead of Union Budget. On the contrary, the major financial policy decisions are put on hold or deferred ahead of the budget to make it announce during the budget speech of the Finance Minister. However, the substantial interest rate cut ahead of the Union Budget 2017-18 this time around has pleasantly surprised the market and the home buyers.
The analysts are even calling the year end speech of the Prime Minister Narendra Modi that led to the banks cutting down the interest rate as mini-budget. It is hence expected that the the rate cut has only been symbolic and major substantial gains are in store to be unlocked with the Union Budget.
Was the rate cut really a precursor to more sops for realty sector in budget? At least the larger stakeholders of the Indian real estate would like to believe this. Kaizad Hateria, Brand Custodian and Chief Customer Delight Officer, Rustomjee Group says yes it could be a precursor to more sops for real estate sector. According to him, the developers are expecting regulation of norms which will enable seamless transaction for customers and stakeholders.
‚ÄúFor example, clarity and uniformity in DCR norms, single window clearance, time bound approvals, cluster redevelopment schemes to be more attractive, FSI and TDR norms and seamless flow in stamp duty taxation. We shall expect sops in clarity for the benefit of the customer. With financially disciplined developers having focus on its customers and the timely delivery of their projects, consolidation within the real industry is what we expect in the year 2017. Also, with the implementation of RERA, we foresee confidence coming back among buyers,‚ÄĚ says Hateria.
Major budgetary bonanza for home buyers?
- The interest rate cut that followed with Prime Minister‚Äôs year-end announcement indicates major bonanza for home buyers in Union Budget
- No precedence of sudden rate cut ahead of budget suggests the need for feel good factor was immediately felt while major bonanza is being worked out
- Tax incentive to home buyers clearly indicate the government wants to reach out to middle class home buyers post demonetization
- Finance Ministry sources claim the specifics for the home buyers in budget still being worked out ¬†¬†
Parth Mehta, Managing Director, Paradigm Realty says he is pretty hopeful of more policies like tax benefits for affordable housing, home loan interest rate reductions, relief in income tax for individuals.
Vivek Mohanani, Joint Managing Director, Ekta World also believes that the year 2017 will definitely be a good year for the real estate sector, helping the sector with an upsurge with the changes that have taken place in the current financial year.
‚ÄúThe coming year is expected to write a new growth chapter in the realty sector which include the reduction in interest rate, increased FDI, and increase in loan portfolios. With the government giving sufficient interest rate cut precursor, the realty sector is definitely going to see buoyancy in the Union Budget,‚ÄĚ says Mohanani.
There are reasons to believe that the policy makers are in a crisis management mode and hence the rate cut was immediately announced. Had it not been the case this could have been put on hold and announcement would have been made in the budget speech. However, the government found it deemed to offer something instantly while other sops for the home buyers were being worked out.
The sources with the Finance Ministry also confirm that the government is also working out the modalities to provide higher tax incentives on home loans to boost the real estate business that has been worst affected with the demonetization. The sources even claim that the government cannot afford to completely ignore the issue now since it goes against the oft-repeated commitment of ‚ÄėHousing for All‚Äô.
A tax incentive post the demonetization that has made the banks flush with funds would send a strong message to the market. The tax concession is the only way out to not only keep the sector back on track that contributes significantly to the GDP (Gross Domestic Product) but also reach out to the middle class Indians across the country.
Thus, it could be vouchsafed to say that the rate cut being referred as the mini-budget in popular parlance has been the precursor to substantial home buyer bonanza package in the Union Budget 2017-18.
By: Ravi Sinha