JOIN USThe Union Budget of 2018 focuses on the ease of living for both urban and rural India which is a positive news for the real estate industry. There have been a few factors that augur well in favour of the industry, making it a worthwhile proposition for investors.
Here are a few factors in detail:
Taxing of long-term capital gains (LTCG), exceeding Rs 1 lakh at the rate of 10%: This will discourage the equity and mutual fund investors holding assets for a minimum period of 12 months, making real estate the better investment option. It was also evident in the recently concluded QuikrHomes consumer survey, where half of the total respondents believed that real estate is the most profitable investment class throughout metros and tier-II cities in India.
Affordable housing projects: The government has devised significant catalysts like granting infrastructure status to affordable housing to increase demand and create favourable conditions. A dedicated affordable housing fund (AHF) will be set up under National Housing Bank, funded by priority sector lending and fully serviced bonds. This will allow better access to capital for related developments in urban and rural areas. To expand the inventory of affordable homes in FY19, 51 lakh homes will be built in rural areas and 37 lakh homes in urban areas under the Pradhan Mantri Awas Yojana.
Massive infrastructure investment: The allocation of 11,000 crores and 17,000 crores for the expansion of Mumbai and Bengaluru rails respectively will help de-congest the city centres and boost new construction in the suburban areas of these cities. This can be a great opportunity for real estate investors looking for higher returns on their investment, which is also evident from the consumer survey which stated Bengaluru, Mumbai, and Pune as the real estate hotspots.
Better air connectivity: This can provide a colossal business growth and office space demand in smaller cities, with an obvious demand for housing on the back of job generation.
Real estate transactions & tax: If the circle rate does not exceed 5% of market value, no adjustment will be made towards the capital gains on a real estate transaction which is bound to attract more investors in the sector. This will facilitate extra savings if there is parity between the market rates and the circle rates. Cities which are not under the heavy influence of real estate investors and where prices are rational may benefit.
The real estate sector missed out on direct incentives in the Budget 2018. But, the future looks bright as better infrastructure, connectivity, and housing will pave way for greater housing and commercial demand in the developing regions.
(The author is vice president &
business head, Quikr Homes)