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Focus On First-Time Homebuyers

The real estate sector in general and the housing sector in particular has got a fillip in the latest Budget

Photo Credit : Ritesh Sharma


Finance minister Nirmala Sitharaman has made all the right noises in the Union Budget as far as the realty sector is concerned. Whether it is the mention of model tenancy laws to push the concept of rental housing or the target of constructing more than 19 million rural houses, the builders and developer community, at least the organised ones, have expressed happiness with the budget announcements, which they anyway do each year. 

Affordable homes are expected to find more buyers now, particularly those homes that are priced at Rs 45 lakh. This is because the budget has announced major tax benefits by way of interest deduction up to Rs 3.5 lakh (against Rs 2 lakh earlier) for affordable housing to help stimulate demand. This relief will now be available until March 31, 2020.

“This can help attract first-time homebuyers,” says Anuj Puri, Chairman, ANAROCK, a leading property consultants.

“This tax benefit (interest deduction) will boost demand substantially. This will significantly benefit first-time homebuyers who will enjoy the benefits of interest subvention under the CLSS (credit linked subsidy scheme) and the announced tax benefits,” said Ramesh Nair, CEO and Country Head, JLL India.

Jaxay Shah, Managing Director of Savvy Infrastructure, a Gujarat-based developer and Chairman, CREDAI said that while the budget measures will provide thrust to the housing sector and boost demand there was no need to keep a cap of Rs 45 lakh for the deduction. He requested the government to extend this benefit to all homebuyers without any cap on the value of housing property. Confederation of Real Estate Developers’ Associations of India (CREDAI) is the apex body of private real estate developers representing 12,500 members spread across 23 state-level and 205 city-level chapters in India.

Niranjan Hiranandani, President, National Real Estate Development Council (NAREDCO) said: “Liquidity has been a major concern for the realty sector, which the government has tried to address to a certain extent in this Budget.”

The finance minister 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 finalised 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 organised 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 finance minister 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.

Abhishek Lodha, Managing Director & CEO, Lodha Group said the announcements in the Budget are optimistic towards the real estate sector. The tenancy law will ease out the process of renting which, in turn, will bring transparency during the agreement, Lodha added.

According to Sanjay Dutt, Managing Director & CEO, Tata Realty & Infrastructure the 2019 Budget has come as a mixed bag for the real estate sector at a time when the industry is showing signs of revival. The tax deduction takes the government’s Housing for All by 2022 initiative one notch ahead, he said, adding that the builders’ liquidity concerns could have been addressed better.

Hits & Misses
If there were sops and positive direction for the homebuyers in the Budget, there were some noticeable misses as well. Most stark was lack of incentives to homebuyers seeking houses priced above Rs 45 lakh, according to Amit Modi, Director of the NCR-based ABA Corp. “Legitimate demands such as industry status and single-window clearance for projects have been ignored in this Budget.”
Agreed Ashish Bhutani of Bhutani Infra. “With the Budget only catering to low-cost housing, the middle-class housing segment has been completely ignored,” he says. Hawelia Group Chairman Rattan Hawelia pointed out that the measures needed to revive stalled projects did not find any mention in the budget speech.

Puri of ANAROCK feels the developers may not see consumers and investors return to the market in sufficient numbers, barring in affordable housing. “The all-important ‘industry status’ remains elusive, taxes were not sufficiently moderated and land reforms were not mentioned at all,” Puri says.

In sum, the residential housing sector is still not out of the woods. There is a pile-up of unsold inventory, availability of cash to complete spending projects continues to throw up new challenges to the builders, and more important, the potential homebuyers, that too in good numbers, continue to wait and watch. Given the ground realities, it will only be prudent for the government to invite associations like CREDAI, NAREDCO, etc. for more frequent dialogues in order to find practical solutions to potentially solvable issues.

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Union budget 2019-20

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