This will unlock array of opportunities for promoters which would be transferred to end buyer
Prime Minister Narendra Modi’s present on New Year’s Eve for affordable housing yet again gets a boost with Finance Minister Arun Jaitley’s budget announcement. The biggest impetus was when Jaitley give affordable housing ‘infrastructure status’.
This status will unlock array of opportunities for the promoters which would be transferred to the end buyer. This would allow the real estate developers to borrow at a lower interest rate and obtain finance from banks much more easily. This will also reduce cost of the developers and attract investment in the sector.
Knight Frank India, CMD, Shishir Baijal termed this budget “as one of the path breaking budgets with far reaching changes especially for the real estate sector.” Rahul Nahar, founder, XRBIA Developers said, “It’s a dream budget for affordable housing. Infrastructure status will transform the sector much like deregulation did to telecom in the 1990’s.”
Tata Housing, MD and CEO, Brotin Banerjee said that the government has realised that housing and infrastructure can be two pillars to increase GDP and accelerate economic growth. “The new status will increase the resource allocation for the sector, catalysing housing supply and reducing the supply gap,” Banerjee added.
This budget was critical for the segment because affordable housing is the biggest need for the middle class; will create jobs that were lost due to demonetisation and boost in real estate will promote growth in other industries like cement and steel.
“The applicable exemptions for affordable housing will now be recognised on the basis of carpet area of 30 sq. m. and 60 sq. m. instead of on the basis of saleable area. The 30 sq. m. limit will only be applicable within the corporation limits of the 4 major metros. For fringe areas of these metros and all other cities, it will be 60 sq. m. on carpet area. This will effectively serve to increase the number of projects falling under this segment,” JLL India chairman and country head, Anuj Puri said.
The proposal of tax relief to developers on unsold inventories and the reduction of long term capital gains tax period from 3 years to 2 years have come as a relief to the sector.
Further, the FM also announced National Housing Bank (NHB) allocation to refinance individual loans worth Rs 20,000 crore in new fiscal.
The FM also allocated Rs 23000 crore for the Pradhan Mantri Awas Yojana (PMAY) and plans 1 crore houses for the poor by 2019.
This is in line with government’s ‘Housing for all’ target. Banerjee stated, “This budget has brought us a step closer in achieving the mission of providing housing for all. Implementation of these schemes will be essential for its success. Clarity on the definition of ‘affordable housing’ will be useful.”