BALANCED, but not a boon for real estate

Anuj Puri
Chairman, ANAROCK Property Consultants

All eyes were on the Finance Minister as he delivered his fifth full Union Budget – the last one before the general elections in 2019. As expected, the Budget turned out to be populist and sounded excessively cautious while the need of the hour was to provide a positive boost to the economy, which is reeling under the pressure of structural changes and policy reforms.

Budget did not offer any substantial incentives to individual taxpayers, with slabs remaining constant. A change in the standard tax deduction in lieu of transport and medical expenses, which now stands at Rs 40,000, was the only gift to the salaried class. There was no change in tax savings on home loans, nor were the 80C limits raised. While this put paid to any hopes for significantly increased home- buying appetite, there were some notable announcements with positive implications for the real estate sector:

Push for affordable housing: As many as 51 lakh houses in rural areas are to be built in 2018-19. Also, a dedicated Affordable Housing Fund was announced in this Budget. These are the right moves towards achieving the vision of Housing for all by 2022.

The Budget addressed the anomaly under Section 43 CA to tax real estate transactions at their real value rather than the value arrived at by applying artificially higher circle rates. As per new announcement, if the circle rate does not exceed 5 per cent of transaction value, no adjustment is required towards the capital gains on a real estate transaction. It will help in terms of some extra savings if there is parity between the market rates and the ready-reckoner rates. Cities which are not under the heavy influence of real estate investors and where prices are rational may benefit from this announcement.

Regional air connectivity: The regional air connectivity scheme to connect 56 un-served airports is good news for business growth and office space demand in smaller cities, with a natural spinoff demand for housing on the back of job generation.

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Curbing crypto-currencies: The Government is landing down heavily on crypto-currencies such as Bitcoin. There was conjecture that crypto-currencies would find their way into Indian real estate, as it has in developed countries, effectively becoming the ‘new black money’ in the sector. With the Government committed to taking all necessary steps to eliminate the use of crypto-currencies in the country, people who were looking at them as a get-rich-quick route will have to look at traditional asset classes and investment routes again.

• A change in the standard tax deduction in lieu of transport and medical expenses, which now stands at Rs 40,000, was the only gift to the salaried class.
• The Budget addressed the anomaly under Section 43 CA to tax real estate transactions at their real value rather than the value arrived at by applying artificially higher circle rates.
• The regional air connectivity scheme to connect 56 un-served airports is good news for business growth and office space demand in smaller cities.
• With the Government committed to taking steps to eliminate the use of crypto-currencies, people who were looking at them as a get-rich-quick route will have to look at traditional asset classes and investment routes again.
• The allocation of Rs 5.97 lakh crore for infrastructure spending is a welcome move, though we need a massive push to ensure that the country’s infrastructure meets global standards.

Increase in taxpayers: With the massive crackdown on black money, the taxpayer base has increased significantly. This is, at least indirectly, good news for the real estate sector as seeking home loans is now going to be easy for a larger set of individuals.

Allocation of Rs 1 lakh crore to update education infrastructure over the next four years may result in the development of new education institutes. In addition, if the Government emphasises more on a definitive student housing policy, a new avenue will open up for the real estate sector.

The allocation of Rs 5.97 lakh crore for infrastructure spending is a welcome move, though we need a massive push to ensure that the country’s infrastructure meets global standards.

In a nutshell, while there were not many takeaways for the individual taxpayers, the Budget also did not seem to favour any particular sector. With fiscal deficit slipping to around 3.5 per cent of GDP in 2017-18, the Government seems to be on the right path of taking charge of things and ensuring that the fiscal deficit target of 3.3 per cent of GDP for 2018-19 is achieved.

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