The Union Budget 2017-2018 has brought back smiles on the faces of buyers of residential real estate properties. The Indian real estate sector had been going through rough patches after the declaration of demontisation. Hopefully, the Union Budget declarations would act as the silver lining. Let us focus upon the major points declared in the current budget:
- Affordable housing gets the status of infrastructure
- A 30% bigger square feet area qualifies for the affordable housing
- Easy funding avenues will be made available to the builders of affordable homes
Except the third point, we could assume the benefits of the first 2 points clearly. The easy funding option available to the builders will enable them to arrange the fund for building affordable houses, easily. It will directly fulfill the electoral promise made by the government – the promise of a home to all. Ultimately the buyers will be benefitted.
1. Boost for the development of affordable housing: Two of the primary concerns of the residential property buyers are spiralling price of apartments and the delay in project delivery. Industry experts predict that the status of infrastructure could boost the development of affordable housing projects. Take for example, the move is expected to boost the development and sale of 2 BHK flats in Kolkata, Delhi and Bengaluru.
The issue of delay in project delivery remains the aching nerve. Industry experts opine that with the actual implementation of RERA (Regulation & Development Act 2016) the situation might improve. Individual tax benefit has been declared for the buyers. This has been fixed at Rs 12,500.
2. More area at a lower cost: At present a bigger unit area is qualified for the affordable housing. Thus, a bigger number of small and medium housing projects in Kolkata, Delhi, Pune and Bengaluru (where maximum number of migration takes place) come under the aegis of affordable housing. This is a good news for the industry because more buyers would sign in the new deals and more investments will be made by the big brands of real estate developers.
3. Easily available funding options for the builders: The long-standing demand of infrastructure status for affordable housing will boost the industry by lowering the costs of borrowing and tax liabilities.
In addition, more investments will be made in the real estate industry through the changed policies. Take for example, the Union Budget declaration has enabled the insurance companies to make investments of upto 25% in infrastructure bonds. The abolition of FIPB (Foreign Investment Promotion Board) in the financial year of 2017-2018 and further liberalisation of FDI norms would encourage the foreign investors to invest into the Indian real estate industry.
A diverse avenue of investment means the increased chances of development in the real estate industry. Unarguably, this is one of the most investment and buyers’ friendly Union Budget in the recent past. Industry experts predict that the declarations made in the Budget will boost the development of housing projects in tier 2 and 3 cities. We are waiting to see the final outcomes of the Budget declaration.
