As expected, like any other Union Budget, this year too the 2019-20 Budget evoked a mixed reaction. While a section went euphoric citing it to be ‘revolutionary’ the other lot had lukewarm to indifferent reaction.

With its varied response, the Indian real estate sector was no different. While the budget did manage to bring a smile on the faces of affordable home buyers, on the other, it has also evoked mixed reaction from another section.

So how has the budget impacted the Indian real estate market? Has it been favourable or unfavourable?

Broadly speaking, the real estate sector which is currently sluggish will benefit from the budget. However, the industry experts feel that the government has failed to address some major concerns.

As we know, Demonetization had a crippling effect on the real estate sector. Not only it impacted its growth and the rate of purchase, but changed the paradigm of property buying where property was treated as a mode of investment.

Where the new properties saw a downfall by up to 40 per cent in metropolitan cities, the new projects, on the other hand, witnessed a fall of up to 11 per cent. Construction work too got affected resulting a standstill in many under-construction units.

However, the affect remained for few months only and the sector picked up its pace slowly and gradually. The interim budget trailer pointed towards a blockbuster movie but it scored slightly above average.
Let’s check out how fair the Union Budget 2019-20 have scored for the real estate sector:

Rental Housing

The Union Budget 2019-20 throws a light on the new model tenancy act that will help in clarifying the fair relationship between the lessor and the lessee. The new law will hopefully boost the rental market and will contribute in strengthening and streamlining the same.

The proposal to increase the TDS exemption limit for rental properties from ₹ 1,80,000 to ₹ 2,40,000 per year. Complete details on rental housing will soon be circulated to the states as it is finalized.

Affordable Housing

Taking a big leap, the budget earned a lot of appreciation countrywide for making affordable housing more affordable. Focusing more on the central government’s pet scheme – Pradhan Mantri Aawas Yojana – in both rural and urban areas, the FM announced further deduction of ₹ 1,50,000 on the payment of loan interest.

With the total deduction rising up to ₹ 3,50,000, the step is expected to invite more people to purchase houses not costing above ₹ 45,00,000. However, there is a slight catch in this. According to some experts, the assessee will not be able to enjoy the complete benefit of the taxing scheme as the total interest payable in a year would not exceed ₹ 3,50,000 bar.

Hence, the affordable home buyer will not be able to claim complete deduction. There are some more terms and conditions attached to it:

• The sanctioning of the loan should fall within the period of April, 2019 to 31st March, 2020
• The cost of the house on the stamp duty should not exceed ₹ 45,00,000
• The property in question should be protected under the affordable housing scheme category
• There should be no residential property on the name of the buyer at the time of loan sanction

Infrastructural Development

The current budget has put a core focus on building path for India’s high growth by emphasising infrastructural development. According to the field experts, this area has high potential to synchronise the housing demand and supply.

The central government has allocated a budget of ₹ 100 lakh crore for development through infrastructure for a duration of 5 years. It is expected to make India a $5 trillion economy by 2024-25.

Also, the central government has deployed new technology in building affordable homes falling under PMAY scheme.

RBI To Regulate HFCs

According to the new budget, hereon RBI will regulate the Housing Finance Companies, bringing the powers of National Housing Bank (NHB) at rest. This step would ensure a higher uniformity in HFCs and NBFCs regulations. This will also enhance the liquidity support for these sectors.

Failed to Address the Middle-class

The first-time middle-class buyers from Tier-1 and Tier-2 metro cities seems to get no benefit from the budget. The cost of a 1-2 BHK apartment in cities such as Mumbai, Delhi and Bengaluru will be nearabout ₹ 50 lakhs and above. Hence they cannot enjoy the benefits of deductions under affordable housing scheme.

No Space for Industry Status, Liquidity & GST reforms

The real estate sector for long has been demanding the industry status but this also left unanswered in the said budget. This results into difficulty in getting legitimate finances from financial institutions.

Further, the government also failed to address the liquidity crisis that the real estate sector is facing since long. This has resulted in decreased interest of investors towards the real estate and the budget 2019-20 failed to revive their interest again.

Also, the government did not address another major concern, that is, single window clearance for projects. The clearance from various departments take up to 36 months for a project to start, thus delaying the delivery.