Budget 2017 analysis: Experts believe middle-class home buyers have been ignored

[] While the finance minister made several announcements for the affordable housing segment in the Union Budget 2017-18, we look at whether these will have any meaningful impact for the average home buyer

While the real estate fraternity has largely welcomed the announcements in the Union Budget 2017-18, certain sections in this sector, apart from the affordable housing segment, as well as buyers, are still trying to figure out whether it will benefit them in any way.

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“The entire focus of the budget has been on the low-income group (LIG) and affordable segment. All the other segments have largely been neglected,” laments Rohit Gera, managing director, Gera Developments and VP of CREDAI – Pune Metro. “Indirect benefits may probably accrue, through additional disposable income in the hands of the SME segment, on account of the reduction in the income tax rate to 25%, for them. Time-bound incentives, including enhanced interest deduction for a limited period, could have helped the other segments in the real estate market,” says Gera. However, this has not happened.

Budget 2017 ignores middle-class buyers

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Experts maintain that while the middle-income group (MIG) home buyers may get some indirect benefits from the announcements made in Budget 2017, no direct assistance was announced for the middle-class.

The finance minister has not catered to the wants and needs of the middle-class tax payers, who have been impacted the most, by the recent demonetisation drive, feels Amit Wadhwani, MD, Sai Estate Consultants. “No relief in service tax and VAT, was a dampener for this class. The onus of filing TDS remains on the end-users for every property transaction. This should have been the builder’s responsibility, as many ignorant consumers miss deducting TDS and end up paying penalties. The focus has been only on affordable housing, but housing remains unaffordable in the top four cities. An additional surcharge of 10%, for income between Rs 50 lakhs to Rs 1 crore, will also hit the upper middle-class tax payers, who may resort to tax evasion methods,” he adds.

[] Here’s why infra status to affordable housing may not mean cheaper homes in the metros

More positive steps needed, say developers

Analysts say that if the government announces some positive steps for segments other than affordable housing after the budget, then, it may boost these segments. “There is not much for the luxury segment from the budget. However, if further interest rate deductions happen over the next couple of quarters, it will boost the luxury segment, as well,” opines Dharmesh Jain, chairman and managing director, Nirmal Lifestyle.

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While the budget has confirmed the roll-out of the GST, it refrained from touching upon multiple taxation under REITs, which could have provided an additional funding avenue for developers focused on the middle and premium-ends of the spectrum.

No relief in stamp duty payments and other taxes

Although recent government budgets have shown sincere appreciation for housing issues, the 2017 fiscal policy should have been more realistic, maintains Manju Yagnik, vice-chairperson of the Nahar Group. According to her, the restriction of 30 sq metres on unit sizes, makes it impossible to achieve affordable housing in metros. “Affordable housing has been given a boost. However, the MIG and luxury home buyers have been completely ignored. Neither is there any ready inventory from the MIG standpoint, nor are there any tax benefits. So, this will not even attract investors. The budget also fails to address stamp duty, surcharge, corporate taxes and other issues. There is no privilege for the investments that buyers make in this segment,” Yagnik explains.

Announcements that will benefit home buyers

The change in the base year for indexation, from April 1, 1981, to April 1, 2001, for all classes of assets including immovable property, may motivate some buyers to invest in this market. Another small relief, has been the reduction in the holding period for calculating long-term capital gains, from three years to two years and some relief on capital gains taxation. This may help home buyers looking to liquidate their property, as they will incur lower taxes, because of the indexation benefits available on long-term capital gain.

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Category: Lifestyle

Debora Berti

Università degli Studi di Firenze, IT

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