[ecis2016.org] After much expectation, the 2016 Union Budget received a lukewarm response from the real estate sector, as well as home buyers. On the other hand, it does give the sector hope for some long-term indirect benefits
The Union Budget 2016-17 hasn’t been all that the developers or the home buyers had hoped for, from a business and investment point of view. Nevertheless, on a positive note, the budget has paved the way for long-term infrastructure development.
You are reading: Budget 2016: No short-term benefits for home buyers
The takeaways for the home buyer, are a mixed bag. The 0.5% hike in service tax is an additional burden on home buyers. The failure to raise personal income tax exemption slabs, has dampened spirits. Economic analysts point out that the budget does not provide for greater employment generation or additional disposable income for urban, middle-class buyers. These are the key necessities, to fuel housing demand in the cities.
For developers, there is no provision that could lower the input cost of projects. Some analysts add that the HRA benefits announced in the budget, will not encourage people to buy a house. Additional surcharge of 15% on income over Rs 1 crore, could be a dampener for the luxury housing segment, as well.
Anuj Puri, chairman and country head of JLL India, states that the announcements have fallen below the expectations but feels that there are some major positive proposals too. While three of the real estate sector’s major expectations – increased HRA deduction, removal of DDT from REITs and boost to affordable housing by allowing 100% deduction on profits made by entities constructing them – have been addressed, the budget offered no financial protection from project delays to home buyers, he explains.
[ecis2016.org] Budget 2016 focuses on housing for the affordable segment
“Most first-time home buyers in the major metros, will be left out of the additional Rs 50,000 tax exemption announced today, as it is applicable only on houses worth up to Rs 50 lakhs that are bought with loans of up to Rs 35 lakhs. This announcement will mostly benefit first-time home buyers in tier-III and tier-II cities. The infrastructure sector was a major beneficiary today,” he elaborates.
Vipul Shah, managing director of the Parinee Group, asserts that the government’s move, to maintain a fiscal deficit target of 3.5% is good for the financial markets and the economy and will pave the way for a strong and sustainable economic growth. The RBI can now ease the monetary policy further in the current cycle, with the government sticking to its fiscal deficit roadmap.
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“This will in turn, boost the real estate sector. Increased infrastructure and rural spending, should kick-start the investment cycle and should have a cascading effect in the economy. Among other measures announced for the industry, 100% deduction of profits for affordable housing projects, bodes well for tier-II and tier-III cities. However, the limit on flat sizes, of 30 sq metres in metro cities, is just not enough to have a meaningful impact. The size should have been at par with that in non-metro cities,” maintains Shah.
While the various stakeholders in real estate look into the cost and benefit analysis of the budget, the immediate reaction the budget has been lukewarm. Consequently, home buyers who were undecided, will continue to wait and watch as there is hardly any tangible short-term benefit that has been doled out for buying a house, especially in the top eight cities.
(The writer is CEO, Track2Realty)
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