There is a Diwali bonanza in store for the ailing realty sector. Players and experts have hailed the Union Finance Minister Nirmala Seetharaman’s stimulus package 3.0 to give a much needed boost to residential real estate demand amid the ongoing festivities by providing income-tax relief for developers and homebuyers.
The FM has proposed an increase in the differential between circle rates and agreement value - from 10 per cent to 20 per cent (under Section 43CA). They expect that a limited-period offer (up to June 30, 2021) will benefit both developers and homebuyers. For homebuyers, it is a clear added financial benefit, to round off the existing offers and discounts. Additionally, the consequential relief up to 20 per cent for buyers of these units under Section 56(2)(x) of the IT Act for the said period is expected to boost demand, especially in the affordable and mid segments. For developers, this move will help clear unsold stock.
As per ANAROCK Research, there are about 5.45 lakh unsold units across the top seven cities priced up to Rs 1.5 crore each and another 49,290 units, priced between Rs 1.5 crore to Rs 2.5 crore. “The additional outlay of Rs18, 000 crore for the PM Awas Yojana (PMAY – Urban) is another welcome step towards fulfilling its vision of Housing for All by 2022. The additional outlay is over and above Rs 8,000 crore already spent this year. It will help 12 lakh houses to be grounded and 18 lakh houses to be completed. This will help bridge the housing gap in the country to a good extent and is simultaneously an excellent economic growth driver, by creating more employment,’’ said ANAROCK Chairman Anuj Puri.
However, National Real Estate Development Council President Niranjan Hiranandani said, in a limited-period offer (up to June 30, 2021), the FM has enhanced this differential from 10 to 20 per cent. This is welcome. “The FM also mentioned a cap on the flat value to be eligible for this - Rs 2 crore. This will result in most projects in metro cities not being able to take advantage of this. It has consistently been pointed out by industry bodies that price points in metro cities need to be kept in mind while offering any such relaxation. The ideal situation would have been one where this relaxation would be applicable to commercial real estate transactions as well,’’ he noted.
Further, Knight Frank India Chairman Shishir Baijal said the stimulus measures announced on Thursday would aid job creation and infrastructure development in the country. “Recognition of real estate as a core sector, creating ancillary industry demand and employment and enhanced Pradhan Mantri Awas Yojana – Urban allocation, will boost housing demand in the country. Besides, the increase in circle rate and transaction value threshold from 10 per cent to 20 per cent will remove a transaction hurdle and save tax, thereby increasing the opportunity for unbridled property purchase activity,” he noted.
On the other hand, Motilal Oswal Real Estate CEO Sharad Mittal asserted that the package would certainly help the real estate sector liquidate inventory, as it brings more homebuyers to the fore. “However, the impact will be limited, as unsold inventory is the highest in Mumbai and NCR markets, where property values are higher than Rs 2 crore,” he viewed.
According to Birla Estates CEO KT Jithendran, it is a win-win situation, as the reforms will allow developers to drive faster and profitable conversions on unsold inventory and make room to focus on further expanding the business, as well as infuse affordability for homebuyers in the form of income-tax relief. This is in addition to the improvements announced in the recent past, such as linking the LTV ratio to new housing loans, reduction in stamp duty and GST concession.