Budget 2020: Expectations For The Real Estate Sector

The real estate sector is in need of positive wings to come out of the tough time it has been facing in the years gone by.  The sector which is projected to contribute around 13% of the GDP of the country by the year 2025 expects a variety of things from the budget including tax cuts, implementation of Alternate Investment Funds, a revision on GST implications on the sector, consumption booster to increasing credit off to ease liquidity followed by extended benefits by the government under section 80 (IBA) for boosting affordable housing. 

As the real estate sector has been the major contributors to the industry it is battling slow or stagnant sales, is seeking quick implementation of the alternative investment fund (AIF) regime to rescue stressed residential projects. Keeping in mind the current challenges of the sector the key expectations from the government are to improve liquidity, balance fiscal discipline with the stimulus, and expedite resolution of stressed projects, few of which are already underway.

A resolution on the liquidity crunch and NBFC crisis is crucial so providing the requisite incentives is expected. Apart from these, ensuring capital gains on par with shares to provide benefits to developers will help maintain the cash flow in the market.

The real estate sector has justifiable expectations from the sector:

Affordable housing: To match with an on-going price range in metros, it is imperative to increase the limit of affordable housing to 1 crore from the current cap of 45 lakhs. This will pay a larger section of the population the benefit in the affordable housing segment where high demand is indeed expected.

Land availability: Availability of land is a major hurdle these days, keeping in mind the “Housing for all 2020” scheme the sector expects nominal charges on empty land pockets for private players to enter this market and therefore meet targets by as promised.

Infrastructure: The sector expects a drastic improvement in the infrastructure which will boost connectivity throughout the country thereby opening up new markets for developers to enter.

Reintroduction of Schemes: The sector also expects the government to reintroduce the subvention scheme as it will eventually result in favour of both buyers and developers. This will build confidence in the developer and also prevent stalling of projects due to capital.

One time rollover/ Restructuring of loans: If the one-time roll-over is allowed, it will enable the completion of stalled/delayed projects with banks pushing the last-mile funding as the existing outstanding loans of developers are a significant road-block.

Taxation benefits: The real estate sector has been tepid since the past 2-3 years however the market value of properties has remained constant. This has made the real estate sector not so attractive for investment, providing attractive tax incentives would stimulate demand and help boost the real estate sector. The sector also expects an increase in the exemption of 80 C from 1.5 Lakhs to 6 Lakhs. On the other hand, capital gains tax is now on 2 homes the sector expects it to increase to the unlimited number of homes. Standard deduction on rental housing should be increased from 30% to 60% along with subsuming of stamp duty and registration into GST.

Focus on Liquidity pattern: NBFC’s are another method to improve the cash inflow in the sector other than loans from banks. Even NBFC’s are struggling to raise capital which is negatively affecting the sector. The budget should address the liquidity problems of NBFC’s to improve the sentiments of the sector at large.

In short, the middle-income group have high expectations from Budget 2020 and is looking forward to having a higher disposable income that will largely release income in the sector.