Budget 2019 expectations: Realty experts demand relief on housing loans and GST to revive the sector

Modi government is all set to announce its full budget on 5th of July. With Nirmala Sitharaman as the new Finance Minister, realty sector has unveiled a host of demands and among them is relief for the homebuyers to buy new properties - the real estate sector is facing a bearish trend for some time now. From GST to housing loans, the sector wants the government to solve the liquidity crisis over NBFC’s increasing the financial limits to benefit the developers. Anand Moorthy, CEO, PropsAMC told Zee Business Online, ''It would be very important to bring down the cost of GST since first time home buyers end up paying almost 11-14% tax on the value of the asset which might be highest in the world. While the cap gain tenure being reduced to 2 years are a welcome move, the index capital gain should also be brought down to 10 per cent like stocks and mutual funds. Giving tax exemption to rented assets for the first year of purchase, since it helps to keep investor interested and create a leasing opportunity for people who cannot afford to buy properties.''

In the last term, Modi government had introduced a number of reforms and regulations in the form of GST, RERA, Benami transactions Act, etc. This budget is expected to deliver huge prospects for realty sector, keeping in mind the market witnessing a flat or stagnant growth. 

However, at a macro level, any and all measures to increase the liquidity in the system including the capitalisation of banks and NBFCs and policies to ease funding to the sector will have a major role to play. The real estate sector plays an important part in infrastructural development of the country, however, due to slow push and silent numbers the sector still awaits the status of the major infrastructure contributor. While providing the financial or easy credit support framework to the real estate developers can bring down their borrowing cost, helping the sector to revive fast. 

Talking about the revival of realty, Manju Yagnik, Vice Chairperson said, ''We expect the realty sector to see a complete revival after budget this year. To maintain its position as one of the fastest growing economies, the budget needs to be a healthy mixture of everything and assure economic and financial growth. Solving the liquidity crisis over NBFC’s by increasing the financial limits is necessary for benefitting the developers at large. Also, to attract more foreign investments it is crucial to build a stronger infrastructure for profitable incentives to be bought into the sector. If the housing loan rates are reduced, it will provide major tax relief and benefits to homebuyers and investors alike. Real Estate sector is a significant contributor to the economy needs a multiplier effect for efficient economic growth.''

As far as the demand side is concerned, the Budget 2019 may consider revamping the existing incentives to individual homebuyers and importantly, plan to increase the home loan interest deduction from the existing limit of Rs 2 lakh p.a, which in itself should rebound the demand for housing units and assist real estate developers to liquidate their high level of inventory of completed homes. Also, the funds liquidated from selling completed properties will further help them develop the pending projects in various parts of the country. 

While from taxation clauses for Special Economic Zones (SEZs) to something for real estate developers, Union Budget 2019 seeks revival of realty sector in order to propel the economy further. Also, foreign investments into the sector will play a huge role in providing support to growth in the long term. However, the ball is in the court of government now and the things will be much clearer on 5th of July.