A very disappointing budget as far as the real estate sector is concerned. There was a lot of expectation from this budget as our PM had proposed Housing for all by 2022 and developing smart cities. The sector has been widely ignored.Overall Growth factor is missing.The industry’s long pending demand for industry status for the real estate sector has not been met, though the sector being the largest employment provider and second largest GDP contributor to the Indian economy. New reforms and rebates would have brought about a sea change to the whole sector and would have accelerated the growth further.
REIT as an instrument could have brought funds for the real estate sector had it been elaborated and permitted for the funds to be used for residential projects. Also tax implications on REIT should have been streamlined. ECB not touched upon either. The sector will continue to face the crunch for liquidity. We were expecting incentives for developing affordable housing in terms of tax rebate on raw materials and additional exemption on the income tax on housing loan, and streaming of other taxes including service tax. On the contrary the service tax has been increased from current 12.5% to 14%.
Even a 1.5% is big amount for a large value product like housing. This goes against the fundamentals of bringing rates down in real estate. Had there been incentives offered on affordable housing, the development in this segment would have been faster. There was some relief expected out of GST. This too will come only next year. In fact, the prospective Buyer that could have bought the house and invested in real estate have been burdened with additional tax.
The housing industry which contributes nearly 7% of country’s GDP has been ignored once again by the government and not given its due status in the economy of the country. Overall it’s a dampened budget for real estate.
