Developers React To Union Budget 2016-17

govt-of-indiaKishor Pate, CMD – Amit Enterprises Housing Ltd.

This Budget could have done a lot more for the real estate sector. However, there were some positives. The fact that the annual housing rent reduction limit has been increased from Rs. 24000 to Rs. 60000 could lead to an almost immediate uplift for rental housing across the major cities. This can also potentially encourage the sentiment for home ownership in the long run.

Also, first-time home buyers have been given the benefit of an additional deduction of Rs. 50000 on home loan interest for loans not exceeding Rs. 35 lakh, where the value of the house is no more than Rs. 50 lakh. This will result in improved home buying sentiment in smaller cities with lower housing costs, such as Pune. An improvement in sentiment will also be seen in the cheaper far suburbs of the metros.

However, this deduction is not sufficient to increase the sentiment much for first-time home buyers in the central parts of the metros like Mumbai, where housing prices are exceedingly high and such an exemption makes little to no difference in the burden on home buyers.

The fact that the market indices took a nosedive immediately after the budget announcement more or less reflects the way sentiment in the housing sector has gone. However, if the RBI announces a cut in interest rates on the heels of the reduced fiscal deficit announced by the Finance Minister, it could be a day saver.

Arvind Jain, Managing Director – Pride Group:

Budget 2016-17 was far below expectations. Some leeway has been given to first-time home loan borrowers, but the relief will not boost demand in the metros. That said, service tax has been exempted for developers who are focused on constructing affordable housing with unit sizes not exceeding 30 square meters in the larger cities and 60 square meters in the smaller cities. This is a significant plus, and in line with the incumbent Government’s intention to boost affordable housing.

Allocation to MNREGA and irrigation activities have been stepped up, so it is logical to expect rural income to rise from this year onward. This can positively affect rural consumption story and boost the growth of smaller towns. Encouragingly, Rs. 1500 crore has been allocated for the moderation of land records in the Digital India campaign, which will definitely have a positive impact on transparency in the real estate sector.

On the retail front, permitting seven days of operation for small and medium-sized shops in the unorganized retail segment will allow them to compete more effectively with malls. This will boost the demand for retail stores on high streets significantly.

The plans to revive inoperational civil airports in partnership with their States with a rather small allocation of Rs. 100-150 crore per airport can have positive implications for the real estate development in these cities. It will boost infrastructure, and airports are also know influencers of demand for all categories for real estate.

All in all, this budget was exceedingly cautious and not enough to infuse any significant doses of vibrancy into the real estate sector.