The essence of the Union Budget 2020 and its impact on the Realty Sector.

The Narendra Modi-led National Democratic Alliance returned to power last year, for its second spell of governance. Nirmala Sitharaman, who was appointed to the post of a finance minister, presented the Union Budget, on February 1st, 2020. The core of the Union Budget generally revolves around three major factors, namely, economic development, a caring society and an aspirational nation. The education sector though, has been the biggest gainer of the Union Budget. The Central Government has allotted a mammoth 99,300 crores for the educational segment, for the financial year, 2021.

On the tax front, the finance minister also introduced new income tax slabs and reductions. Since these rates have been deemed to be optional, they will only be available to those that are willing to predate some deductions and exemptions.

Speculations are rife that the economic growth meter will ascend from 6% to 6.5%, beginning from April 1, 2020. As far as the infrastructure segment is concerned, here is a sum-up. – “?100 lakh crore to be invested on infrastructure over the next 5 years. National Infrastructure Pipeline: - Rs. 103 lakh crore worth projects; launched on 31st December 2019. More than 6500 projects across sectors, to be classified as per their size and stage of development.” 

While the budget was said to have minimum bearing on the realty sector, experts say that the focus remains to be on infrastructure. In the scheme of the Union Budget, the finance minister also introduced measures to support ‘Housing for all’ and ‘Affordable Housing’ scheme. An additional deduction of Rs 1,50,000 was announced for interest paid on loans, that were initially taken to purchase a house. In addition, to pave way for the additional housing scheme, Nirmala Sitharaman proposed the date of loan sanction for availing the additional deduction, by another year.

Speaking of normalization and stabilization of economy is concerned, here’s what finance minister, Nirmala Sitharaman, had to say. “Fundamentals of the economy are strong and that has ensured macroeconomic stability. Inflation has been well contained. Banks saw a thorough cleaning up of accumulated loans of the past decade and then they were recapitalized. Companies were provided an exit through the IBC. Several steps on the formalization of the economy were taken up.” Though the recent announcements might not be able to revitalize the real estate sector to the hilt, it for sure is the beginning of the acceleration, that the industry required. To further stimulate the process, several pioneer developers of the nation suggested a one-time roll-over of loans, something that was prevalent in 2008.

Since the commercial leasing segment has been exceptional, over the last couple of years, the industry experts came up with suggestions of enhancing the rental housing policy. The commercial leasing segment is important to the real estate industry because that is where a chunk of foreign direct investment money, comes in from. What was concerning though for the industry and the government was the stock of the unsold luxury housing, that amounted to Rs 1.5 crore, per unit. However, according to a survey report that concluded in 2019, the sale of the unsold luxury units grew by 10%, in the top seven cities.

Besides, the estate advisory report states that these cities had a total of 89,200 unsold units remaining. The government too, did its bit last year, to trigger growth for the industry. It allowed an additional 25000 crore alternate investment fund, for all the housing projects that were being stalled in their last-leg, under inevitable circumstances.

With the advent of the new housing schemes, several other factors that need attention are the scrapping of gains on the sale of properties, restructuring loan policies and extending the subvention scheme. To add to the tally, it is to be understood that revising the old land record system will entice more foreign projects. Also, speeding up the approval procedure for the pending projects, will certainly help the industry’s cause.

Taking into consideration all the aforementioned points and the Union Budget 2020, it is to believed that the real estate industry will reach the zenith of success, with a little help from the top-notch builders and the government agencies. To herald the beginning of change, finance minister, Nirmala Sitharaman, ditched the old tradition of carrying all budget-related documents in a suitcase. Instead, she carried them in a ‘Bahi-Khata’, wrapped in a red cloth. This was possibly done, to signify that it is time to ditch the western approach of conducting business and embrace the old Indian traditions.   

@ICUBESWIRE