New Delhi, Feb 2 - Though housing for the masses is a key objective of the government, a budget which had multiple schemes for the poor and farmers did not have enough for the real estate sector, stakeholders say.
The sector, which has seen some pathbreaking changes with demonetisation and the RERA Act since 2016 and was hoping for a revival felt dejected with lack of emphasis and further reforms in the Union Budget 2018-19.
"... Real Estate (Regulation and Development) Act, 2016, Credit Linked Subsidy Scheme under PMAY (Pradham Mantri Awas Yojana); extension of income tax benefits up to 60 square metre-sized apartments, amendments in Real Estate Investment Trusts and Goods and Services Tax (GST). While these steps have already paved the way for overall growth of the sector, the long-standing demands for industry status and single-window clearance would have benefitted the sector the most," real estate company Sobha said in a statement.
Finance minister Arun Jaitley on February 1 said no adjustment shall be made wherein the circle rate value does not exceed 5% the considertation.
"Currently, while taxing income from capital gains, business profits and other sources in respect of transactions in immovable property, the consideration or circle rate value, whichever is higher, is adopted and the difference is counted as income both in the hands of the purchaser and seller... Sometimes, this variation can occur in respect of different properties in the same area because of a variety of factors including shape of the plot and location," Jaitley said.
"In order to minimise hardship in real estate transaction, I propose to provide that no adjustment shall be made in a case where the circle rate value does not exceed 5% of the consideration," he added.
This announcement evoked mixed reaction from the sector.
"The government move of the 5% deviation from circle rates to remove hardship is not enough as in many cases the actual deviation of circle rates to prevailing market is as high as 30%," Nagaraju Routhu, CEO, Hero Realty, said.
Abhishek Bansal, Executive Director of Pacific India Group, however, said: "Though there is not much in terms of addressing the problems faced by the realty sector but the move towards no adjustment in case of the circle rate not exceeding 5% of sale consideration is a welcome move."
"Standard deduction for transport, medical reimbursement for salaried taxpayers and incentives for senior citizens will help increase disposable income at hand (hence raising the demand)," he added.
Anuj Puri, Chairman, Anarock Property Consultants described the budget as balanced but not a boon for real estate.
"If the circle rate does not exceed 5% of transaction value, no adjustment is required towards the capital gains on a real estate transaction... It will help in terms of some extra savings if there is parity between the market rates and the ready-reckoner rates," he said, adding that, "cities which are not under the heavy influence of real estate investors and where prices are rational may benefit from this announcement."
The push for affordable housing however, was taken postively by the sector, hoping for the scheme to prop up demand.
The Finance Minister in his budget speech said, the government will establish a dedicated Affordable Housing Fund in National Housing Bank, funded from priority sector lending shortfall and fully serviced bonds authorised by the government.
"Having a dedicated affordable housing priority sector fund under the National Housing Bank will open up new avenues for the developers planning to offer budget homes. The ambitious target of providing 51 lakh rural houses and 37 lakh urban houses under the Pradhan Mantri Awas Yojana will be positive for the ancillary industries, as construction will pick up the pace," Irwin Preet Singh Anand, Chief Operating Officer, OLX India said.
While praising the decision to lower the corporate tax of companies having a turnover of upto Rs 250 crore, Farshid Cooper, Managing Director, Spenta Corporation expressed his disappointment that "stamp duty was not incorporated in GST to ease pressure on homebuyers."
Sarjan Shah, MD, Group Satellite said: "(The) budget has unfortunately ignored the stressed and vilified real estate sector that is in desperate need of government support through specific targeted tax breaks that help make building affordable homes in India viable."
Although the market participants praised the emphasis in infrastructure, smart cities farmers and lowering of corporate tax, which would indirectly push up demand in the realty sector among others, dismay regarding no specific and direct steps for the reform of the sector was evident.