Budget 2020 : What does the Indian real estate sector want from the FM?

The real estate sector over the past year has been firmly molded due to many impactful financial reforms and efforts by the government and the industry. The year ahead is expected to bring more meticulous structuring that will focus on the efficient use of resources. The real estate sector is also an employment-generator sector in the country as it contributes to over eight percent of the Indian economy. However, the last few have witnessed a low in supply-demand ratio, but there seems to be a silver lining with the changing reforms. Budget 2020 expected to be announced on February 1, 2020, will play a  vital role in the resurrection of the primary market, is expected to include well-defined provisions dedicated to improving the sector.

Demanded list of reforms such include, the restructuring of loans, liquidity enhancement, stamp-duty revisions, and lowering of home loan rates from the Union Budget 2020-21. These demands by the stakeholders and real estate advisory firms in India are clearly to uplift the industry from the current environment of mistrust and indifference from homebuyers. The policy revisions are expected to improve the consumption sentiment of potential buyers.

Budget 2020: Demands of the realty sector

• Section 80EEA deadline should be extended from March 31, 2020, to a few more years.

• Including stamp duty into GST.

• Bring Reforms for Tax and policy support for rental housing.

• Major real estate solutions for liquidity problems.

• Increase in the deduction limit under Section 80C, for home loan borrowers.

• Modify the criteria for eligibility of affordable housing benefits, by increasing the cap of Rs 45 lakhs.

The following are the demands are suggested by the real estate consulting firms in India of the industry by from the Union Budget 2020:

 Affordable housing subsidies

On loans taken till March 31, 2020, homebuyers were allowed to claim deductions on interest paid for housing loans by Rs 1.5 lakh to Rs 3.5 lakh for houses valued up to Rs 45 lakh. However, this budget bracket is not enough as prices for real estate have skyrocketed to bring affordability; homebuyers have demanded the interest subsidy on a higher budget bracket of Rs 65 lakh into the interest subsidy scheme.

Enhance liquidity

The expectations from the Union Budget are of systematic and swift infusion of liquidity for developers. The biggest drawback of the present scenario was due to the delay of projects, which not only brought about a liquidity crunch but also affected the buyer’s purchase sentiments. Therefore to revive trust and fresh liquidity a fund will have to be set up to buy out stressed assets of Non-Banking Financial Companies (NBFC) and Housing Finance Companies (HFC). Similar to The National Housing Bank (NHB) imbuing a large sum into HFCs to close the widening funding gap, the upcoming Budget for NBFCs is expected to do the same.

Land reforms

Stakeholder wishes for land solutions that will ease the acquisition of land parcels. The Government’s aid for developers looking to set up manufacturing units or commercial complexes in the form of transparent reforms bringing an end to unscrupulous land holdings will prove instrumental for the economic growth of the real estate sector. The unique identifier (UID) for land parcels under the Digital India Land Records Modernisation Programme (DILRMP) is expected to improve the process of land acquisition for public projects.

Credit off-take

According to Stakeholders’ expertise, to recover from the year-long shadow banking crisis, the Reserve Bank of India (RBI) could cut its benchmark lending rate further and restructure loans to expedite the completion of stalled projects. The focus should be balanced between aiding the developers and also increasing the consumer’s buying power. As mentioned above there is clear room for improvement in the credit off-take in the corporate as well as personal loan segments.

Rental reforms

The Model Tenancy Act should be implemented uniformly as presently it is pending across most States. The rental agreements need to be sufficiently enforced by the Ministry of Housing and Urban Affairs (MoHUA). This will create beneficial policy frameworks, which would influence the growth of rental models and also, provide speedy dispute resolution regulations for traditional rental models.

Homebuyers are on the fence about investing in real estate and are looking to avoid long-term financial commitments until some Budget reforms help improve disposable incomes. Therefore the demands of the Indian real estate sector and the suggestions from the real estate strategy consulting are most relevant and viable for the growth of the economy

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