Union Budget 2020: Budget should bring in bigger reforms to boost the real estate sector

By Sunny Katyal

Director of Investors Clinic

Considering the slew of measures and policy reforms announced by the government in 2019, for boosting real estate market, has a lot of expectations from this budget for receiving the much needed stimulus. There is a need to push for investment in infrastructure, relax income tax slabs, infuse liquidity and most importantly implement effectively all the measures announced last year.

Affordable housing needs to be taken into serious consideration if the sector has to grow. Though affordable housing always formed the core of discussion in stimulating housing real estate, growth in demand and sales have remained slow in spite of efforts by government and private players.

The limit of 45 lacs to avail reduced GST rates of 1% for affordable housing should be increased to INR 65-75 lacs within the prescribed 60 square metres of carpet area to avail GST benefit exemption. The demand for luxuries under the affordable housing segment is increasing with new age millionaires. Interest rates on home loans should be reduced to 7% for the affordable housing segment which is going to be the flavour of the year 2020, due to demand from end users and millennial. Home loan interest deduction should be increased to INR 5 lacs to improve sales. More liquidity should be provided to the masses through raising personal tax exemption limits to improve overall sentiments.

Alternate Investment Funding with an initial funding of INR 25,000 crore needs to be implemented post budget at the earliest. Government also needs to look at reviving input tax credit which was withdrawn earlier. The revival can provide relief to developers and consumers can purchase houses at lower costs, which invariably will help in the growth of the sector.

Government needs to ensure that more funds are infused into housing real estate during this budget. While the approval of INR 25000 crore is a great move by the government, it is not adequate enough to meet the needs of unfinished projects. Unsold inventories, incomplete construction and delayed projects have been the major reasons behind the downturn of real estate sector. Unproductive assets in the form of under-construction, stuck or delayed projects are estimated at 560,000 homes worth ₹4.5 trillion as per recent reports. Moreover, government also needs to ensure that the funds are adequately distributed in tier 2 and tier 3 cities so that developers in the smaller cities are equally boosted with positive sentiments. 2020 budget should mark the beginning of a new growth story with a positive outlook. The sector should witness a boom and also raise the demand amongst the buyers.

With government’s support, we expect the challenge of unsold inventories to get sorted. With right implementation and planning, we expect the real estate sector to meet the existing challenges and rise to newer and greater heights.