The government is due to present the full-year Budget (2019-20) in Parliament on July 5. For the real estate sector, a slowdown in demand across segments has highlighted many challenges ahead. The real estate sector - which relies highly on borrowings - has faced slowdown in the recent past which in turn has impacted property prices. While many analysts expect the cash crunch to remain a drag on the real estate sector in the coming months, some expect immediate measures to boost credit growth. With three years left for the government to meet its ambitious goal of Housing for All, any announcements related to the real estate sector will be watched closely.
Credit ratings agency CARE Ratings said, in a report listing its expectations from the Budget 2019-20 dated June 25, it expects additional allocation for the Pradhan Mantri Awas Yojana. In the interim Budget, the government had allocated Rs 26,000 crore for the scheme.
"We expect higher allocation towards completion of Affordable Housing projects in order to achieve targets under PMAY by 2022," it noted.
Here are some of the other expectations from Budget 2019 listed by CARE:
- Additional allocation towards interest subsidy scheme
- Extension in benefits for affordable housing under Section 80-IBA for housing projects approved till March 31, 2021, from existing March 31, 2020
- Reduction in holding period of real estate investment trusts (ReITs) to be made in line with listed equity instruments to be eligible for "long-term capital asset" benefit
Some experts have demanded industry status for real estate sector.
"With the transformation in the way business is conducted under the reformative Real Estate (Regulation and Development) Act, 2016 (RERA) regime, it is time to recognise the role of the real estate sector as a full-fledged industry," said Shishir Baijal, chairman and managing director at property consultant Knight Frank India.
"Availing industry status would enable developers to raise funds at lower rates and cut down their cost of capital and augment their execution capabilities."
Here are some other expectations listed out by Mr Baijal of Knight Frank from Union Budget 2019:
- Deduction on the principal repayment of housing loans (Section 80 C): A separate annual deduction of Rs 1.5 lakh for principal repayment will provide the much needed fillip to opt for home loans and inadvertently push real estate sales.
- Real Estate Investment Trust (REIT): The government can further push the REIT agenda by reducing the timelines of investment from three years to one year for long-term capital gains taxation; thereby ensuring larger retail investor participation.
- Affordable housing: Some urgent steps are therefore required under the ambit of the upcoming Union Budget to provide a boost to the sector. To begin with, the government can enhance the eligibility criteria for Credit Linked Subsidy Scheme (CLSS) and GST rate benefits to help a larger section of consumers in urban centres.
- NBFC liquidity crisis: Non-banking financial companies' (NBFC) capital crunch has been negatively impacting the developer community and the real estate sector as a whole. The government needs to take fiscal measures to address the worsening NBFC liquidity crisis. Permission to issue tax-free bonds to raise capital will be a prudent step in this direction.
- Rental housing: The government needs to align with changing consumption patterns as trends like co-living are already gaining ground.
- Infrastructure: The government should accelerate its initiatives on infrastructure development which will open up cheaper land parcels for housing and ensure better affordability.