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3rd July 2019

Budget 2019: Expectations of the Real Estate Sector from Modi Government 2.0

The re-elected Modi Government along with the newly appointed Finance Minister, Nirmala Sitharaman will be presenting the Union Budget on 5th of July, 2019 which will include many new reforms and changes for different sectors. The real estate sector not only provides a roof for the citizens, but also contributes about 7% to the country’s GDP and generates about 14% employment. Naturally, there are some expectations and demands of the realty sector which, they are hoping, will be considered by the new Finance Minister, who will be presenting her first ever Budget.

Expectations of the Real Estate Sector

Despite efforts to improve the real estate sector, there has been a decline in the industry due to delays in projects. Big announcements from the Budget can help revive the industry and turn it into a developed sector, from a developing one.

  • Recognition as Infrastructure: The status of infrastructure has been awarded to affordable housing. There is hope that the entire real estate sector will be granted the same in this Union Budget.

 

  • Reduce Liquidity Crunch: The liquidity crunch has hit the real estate market, which has led to many delayed and cancelled projects. Corrective measures need to be taken to find a solution to the declining liquidity like increasing the finance limits on NBFCs which are a source of funding for the developers.

 

  • Reinstatement of Input Tax Credits (ITC): The removal of ITC from GST has led to a considerable reduction in the profits of the builders, which might lead to high prices for buyers. Reinstatement of complete ITC benefits will result in prices remaining under control and help the builders come out of the current financial crisis.

 

  • Creation of a Stress Fund: Industry representatives are urging the government to create a stress fund for incomplete or delayed projects across the country as well as provide EMI holiday for stalled projects, which would provide relief to over five lakh homebuyers.

 

  • Tax Benefits for Buyers and Investors: Benefits in the form of direct reduction in tax, better rates on housing loans and increasing the deduction limits can help the buyers as well as increase the investments in the sector. Lucrative advantages for foreign investors can also help increase the investment and reduce the liquidity crunch.

 

The real estate sector is expected to contribute about 13% to the GDP by 2025 and reach $1 trillion by 2030. This sector could definitely benefit and improve if some of these ideas are implemented, especially after all the issues created because of shortage of liquid funds. While no one can predict what the actual Budget will be like, Modi’s vision of ‘Housing For All’  by 2022 could mean that there might be some positive news for the realty sector on the 5th of July, 2019. All eyes are now on the new NDA government to see how they can help improve the economy and accelerate growth.

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