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Budget: Realty Stock Tumble Despite Push To Affordable Housing

Shares of realty companies including DLF, Indiabulls, Prestige, Oberoi Realty among others were down by over 1 per cent in afternoon trade on Friday, July 5 despite thrust on affordable housing announced in the Union Budget. Share prices of stocks including DLF (fell by 1 per cent), Oberoi Realty (fell 3.3 per cent), Prestige Estate (2.2 per cent dip), and Indiabulls (0.5 decline reported) declined in the afternoon trade despite Finance Minister Nirmala Sitharaman saying in her maiden Budget Speech that government was planning to build 19.5 million rural houses in the second phase of its “Housing for All" program. In the last five years, the government has built 15 million rural houses", she said.

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Market analysts told BW Businessworld that the market reacted more out of anticipation of increased borrowing and a possible rise in fiscal deficit from a slew of announcements made during the budget speech. "Reduction of Corporate Tax to 25 per cent, for example, should have covered all categories of companies. The market did react negatively during the trade that coincided with the budget speech in Parliament," said a senior analyst from a leading Mumbai-based brokerage house. 

Coming back to the real estate sector, the FM in her maiden speech spoke about the need to have a Model Tenancy Law so as to promote Rental Housing. "It is proposed that several reform measures would be taken up to promote rental housing. Current Rental Laws are archaic as they do not address the relationship between the Lessor and the Lessee realistically and fairly. A Model Tenancy Law will also be finalized and circulated to the States," she said in her speech. "The proposal to bring reforms in the current rental housing norms will definitely balance the relationship between both landlords and tenants. This will further make the Indian rental market organized and transparent across the country," says Honey Katiyal, Founder & CEO – Investors Clinic.

On his part Anshuman Magazine, Chairman and CEO, India, South East Asia, Middle East and Africa, CBRE said: “The FM specifically mentioned the requirement for investing in rural road infrastructure, connectivity and rural housing and promised construction of 1.95 crore rural homes by 2022 under the government’s Housing for All scheme and equipping these homes with toilets, electricity and LPG connections. An additional deduction of Rs 1.5 lakh on interest paid for affordable housing loans till March 2020, a model rental tenancy law to enhance the rental housing market are measures that will continue to support the housing market in the country.”

The FM also announced deduction of interest for affordable housing, alignment of definition of affordable housing with GST Acts, among others.

Reacting to the number of measures announced for the real estate sector in the Budget, Satish Magar, President, CREDAI National said: "Additional deduction of Rs. 1.50 lakh on interest paid for a house purchase from Rs. 2 lakh. Total benefit from the measure rises to Rs. 3.5 lakh. FM says net gain to the consumer would be Rs. 7 lakh. It gives hope that the impact on housing demand would be watched and further steps taken."

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