Mixed Bag for Real Estate Sector in 2018 Union Budget

The Union Budget 2018 holds a mixed bag for the Indian real estate sector. Finance Minister Arun Jaitley has majorly focused on the farming and agriculture sectors with this budget. However, he has announced one positive development for the affordable housing category which has come as welcome news for real estate developers. The Finance Minister has stated that a dedicated AHF (Affordable Housing Fund) will be set up for the sector in the National Housing Bank (NHB) and this will be funded via fully serviced bonds and priority sector lending shortfall and will obtain full authorization from the Central Government.

The Finance Minister also stated that the poor in India only wants to own his own house through honest income and this is a far cry as compared to Benami properties which are earned via corrupt means. He talked of the Government helping these people get roofs over their heads. There is a goal of Housing for All by 2022. The PMAY (Pradhan Mantri Awas Yojana) has been launched for this purpose in both urban and rural zones. 51 lakh homes have been allocated for 2017-18 and 2018-19 respectively, i.e. more than 1 lakh homes will be built in rural zones. In urban zones, assistance has been given for building 37 lakh homes.

Experts have stated that the real estate industry has welcomed this decision to set up a dedicated AHF. This will help in generating more supply of affordable housing and will garner higher demand from buyers who are primarily end-users. The setting up of this fund will give a major impetus to the affordable housing sector and real estate in general. This will also boost growth of ancillary industries in this sector. The relaxation of the income tax adjustment where there is less than 5% as difference between consideration and circle for realty acquisitions is also a good move.

However, the real estate industry is a tad disappointed with the absence of any changes in GST or income tax rates and slabs and this will give no added benefits to homebuyers in major metro cities. The lack of full industry status for real estate will also hinder ability to raise funds at more affordable rates.