• News
  • Columns
  • Interviews
  • BW Communities
  • Events
  • BW TV
  • Subscribe to Print
BW Businessworld

A Balanced Budget With Some Big Moves

The real estate sector in particular has reasons to be pleased with the budget. Affordable housing, has been granted infrastructure status

Photo Credit :


We believe Budget 2017 is balanced and growth oriented with a focus on farmers, rural economy, infrastructure, affordable housing, youth, employment, digital economy and fiscal discipline. The decision to boost investment in rural areas, infrastructure and poverty alleviation, while maintaining fiscal prudence is admirable More importantly, there is nothing negative in this Budget .

The real estate sector in particular has reasons to be pleased with the budget. Affordable housing, has been granted infrastructure status. While it is only a partial fulfilment of a long standing demand of the real estate sector for industry status, we believe it is a good starting point. Infrastructure status opens doors for the affordable housing segment, which has a lot of pent up demand. Developers will have access to equity and debt funding at lower costs. It will also help in attracting foreign investment.

The Government has redefined affordable housing by making carpet area the parameter for affordable housing, instead of the built-up area. The limit of 30 square meters now applies only in municipal cities of four metropolitan cities, while in the rest of the cities, the limit is 60 square meters. This will increase housing size by 30%. It will also incentivize affordable housing for developers who were earlier deterred by the small size of homes. The Budget has also extended the period of tax free profit from affordable home projects from three years of approval to five years. This should give developers more time to complete projects.

The Government's announcement to build one crore houses for the poor by 2019, along with an allocation of Rs 23,000 crore for Pradhan Mantri Awas Yojana, will bring the country closer to realising the "Housing for All" mission by 2022.

There is more good news for the real estate segment. Reduction of long-term capital gains tax period from three years to two years will encourage investments in real estate. Post demonetisation property sales have slowed down and we hope that with the reduction in holding period, investors will start looking at real estate favourably again. Another move that will have a positive impact on the sector is the abolishment of Foreign Investment Promotion Board. This will make it easier for developers to get foreign funding through the automatic route.

The Modi Government has always stressed on infrastructure as one of its big priorities, which was reflected in this Budget as well. The allocation for infrastructure is now substantial at over Rs 3,90,000 crore. It has provided Rs 2.41 lakh crore for transport sector, including railways, road and shipping. Allocation for national highways has also been increased to Rs 64,000 crore from Rs 57,676 crore earlier. Higher investment in infrastructure is much needed and will help spur economic growth.

Several other key measures were announced in the budget which will impact real estate, construction and infrastructure. National Housing Bank will refinance individual loans worth Rs 20,000 crore in FY18, which will provide much-needed relief to lenders. About Rs 27,000 crore is to be spent on the Pradhan Mantri Gram Sadak Yojana; 1 crore houses would be completed by 2017-18 for houseless.

Overall, we believe it is a sensible Budget. It is fiscally prudent and the special focus on affordable housing, rural areas and infrastructure will set the stage for economic growth.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Tags assigned to this article:
Union Budget 2017-18 housing for all 2022 real estate

Sachin Sandhir

Sachin Sandhir is global managing director, Emerging Business, RICS

More From The Author >>