Medium to long term outlook positive; challenges in the immediate t..
One of the biggest issues being faced by the construction industry was the availability of finance and liquidity February 2020
CW gathers the real estate sector’s reaction to the Union Budget 2020 on the benefits it has reaped and expectations that it did not meet.
Satish Magar, President, CREDAI National, says, “Budget 2020 has not been encouraging for the Indian real estate sector, which needs immediate attention from the government. No sector specific measures were announced for real estate and as an industry we expected more bolder steps from the government to revive the ailing sector such as providing more liquidity for the sector, onetime restructuring of loans, and tax deductions on home loans to give impetus to buyer sentiment. Unfortunately, none of these issues have been addressed, except providing tax holiday for one more year for to affordable housing developers and loan sanctioning- which was due for some time. Budget 2020 needed steady fiscal invigorating measures, focusing on demand creation. The only way in which this budget can boost real estate sector is by accelerating growth to 6.5 per cent in 2020-21 from 5 per cent at present, boosting income and thereby inducing demand for new homes.”
Rahul Grover, CEO, Sai Estate Consultants Chembur (SECCPL), shares, “This year, the budget has revealed the government's intentions towards bettering infrastructure. The National Infrastructure Pipeline includes 6,500 projects across the country and Finance Minister Sitharaman has also announced the allocation of Rs 273 billion for industry and commerce in FY21. The scope of commercial projects will show an incline, as can be seen from the government's plans of developing a 9,000-km economic corridor. Along with this, plans for developing strategic national highways have also been announced, which can help bring about developmental changes in the real estate sector as well. Additionally, the Finance Minister has also extended the tax holiday on profits for developers involved in affordable housing projects till March 2021. These announcements bring glad tidings, as advancements in infrastructure are a trigger for the development of society. The real estate sector can expect an array of opportunities to explore different projects - both residential and commercial, and the tax benefits being offered on the Affordable Housing initiative are a positive indication of the year to follow.”
Regarding the sop for affordable housing, Vivek Chandy, Joint Managing Partner, J Sagar Associates, says, “I do not believe that extending the period by one year will give the Real Estate industry the stimulus that it was seeking or that it probably deserved.” He adds, “Residential real estate developers were hoping for much more than merely extending existing benefits for affordable housing. Consumption across cities is low and many developers are facing insolvency. Had there been moves to directly help developers or lenders in the sector it would have been welcome.”
T Chitty Babu, Chairman and CEO, Akshaya, avers, “We appreciate the key steps initiated by the Finance Minister to build a robust and reliable financial sector. The infusion of Rs 3.5 trillion into PSU banks will allow the banks to reduce the stress and aid real estate developers in procuring funds for the projects. Fund raising is an important aspect and we hope that it is implemented seamlessly in the coming financial year. The allocation of Rs 100 trillion to build infrastructure and boost warehousing opens fresh avenues for real estate developers to be part of the next phase of growth in the country in the next five years. Skill development at different levels of infrastructure will allow the real estate sector to bridge the gap and train the youth to address the evolving demands of the real estate sector. The changes introduced to income tax slabs and the flexibility to be part of old tax regime or the new regime is a progressive step to boost consumer sentiment of the real estate sector. The tax holiday extended by the Finance Minister for the affordable housing projects by one more year will encourage developers to undertake and initiate more projects under the affordable housing segment.”
Anurag Mathur, CEO, Savills India, says, “We welcome the initiatives announced in the Union Budget 2020-2021. The government has focused on ensuring surplus disposable income in the hands of consumers. One of the important announcements in this area has been the recalibration of the personal income tax rates. Removal of Dividend Distribution Tax is another commendable step. The single investment clearance cell will bring additional efficiencies. The extension of tax holiday for affordable housing is on the expected lines, given the pressure on the sector. Focus has been retained on urban development by committing to 5 additional smart cities. The focus to boost the primary sector, warehousing, infrastructure and PPP will be useful in the long term. Having said that, the real estate sector would have preferred additional benefits. Clearly, the government has walked a tight rope to maintain the fiscal discipline while announcing several initiatives. Overall, the budget leaves a significant scope for extra-budgetary announcements similar to 2019.
Rohit Gera, Managing Director, Gera Developments, shares, “The move to provide more money in the hands of the taxpayers and elimination of the dividend distribution tax are welcome steps. The government has continued down its stated path of removal of exemptions and deductions and as a result, has not provided the necessary stimulus needed to boost the real estate sector. As a result, the sector will see a slow recovery with more pain for many home buyers and developers.”
Sharing his views is Sunny Kataria, Vice President, Real Estate, OLX India. He says, “There were many expectations from the union budget in 2020 for residential real estate. While the government has furthered its commitment to the affordable housing sector, many issues remain unresolved. To further incentivise home-buyers in the affordable housing segment, the deduction of Rs 150,000, announced in 2019, will be extended to loan sanction by one year. This brings much relief to residents. For developers involved in affordable housing projects, the extension of the tax holiday on profits by one year to March 2021, is a welcome move.” He adds, “Restructuring of loans for developers is one key issue that was expected to be addressed in this budget. This would have uplifted the overall sentiment of the real estate industry. Overall, it’s a very balanced budget and addresses the challenges of all the sectors including agriculture, manufacturing, education, healthcare, energy, and startups.
On his part, Kamal Khetan, Chairman and Managing Director, Sunteck Realty, says, “The union budget predominantly focussed on revitalising the affordable housing which is an attempt to revive the animal spirit in the real estate market. In order to meet the ‘Housing For All by 2022’ and stimulate homebuyer’s sentiment, there is a direct intervention through one year extension on exemption of additional interest deduction of Rs. 1.5 lakh for home buyers under the affordable housing sector. Additionally, extending the tax holiday on the profits of developers involved in affordable housing projects to March 2021 is a huge support to de-bottleneck issues surrounding the affordable housing segment. It will provide an impetus to the sector for creating more demand for MIG and LIG group of homebuyers. Moreover, The trickledown effect of the tax saving will mean disposable income in the hands of the common man, thereby increasing consumption and investment in real estate.”
Shishir Baijal, Chairman & Managing Director, Knight Frank India, says, “With the economy in midst of a sharp slowdown, the Union Budget for FY21 was being awaited with high expectations to act as a growth booster. However, the budget fell short of industry expectations, with no major announcement for accelerating growth. Lowering of income tax rates with removal of exemptions, may not lead to any meaningful boost to consumption. As far as the real estate sector is concerned, the industry was hoping that the Government would come up with measures to boost housing demand. However, the removal of exemptions under the new income tax regime, implying no tax benefit on principal and interest for home loans would be a dampener for the sector. The extension of benefit for affordable housing for the developers as well as home buyers by one year is a step in the right direction. As far as the funding constraint for the real estate sector is concerned, the government spoke about enhancing the partial credit guarantee scheme for NBFCs, which again may not suffice for the ailing real estate sector.”
Ankur Gupta, Joint Managing Director, Ashiana Housing, says, “The middle income and affordable housing segment in Indian real estate will see a continuous boost with the finance ministry's announcement on the sector. Certain other factors like liquidity crunch, funds at lower rates, additional foreign investments, single-window clearance, etc. should also have been a focal point in the finance ministry's agenda since they will drive a steady, speedy growth of the sector.”
Ashok Mohanani, Chairman, EKTA World and Vice President NAREDCO Maharashtra, says, “The budget focused more on Infrastructure upgrade of Chennai-Bengaluru and Delhi-Mumbai Expressway estimated to be completed by 2023. This will not only raise the skill development in the infrastructure sector but will also open new markets for builders along with residents. Proposing the development of 100 new airports to be built by 2024 under Uddan scheme will bring in NRIs to India and increase the investment in the country. To bring in indirect relief to the real estate sector proposal of spending Rs 100 lakh cr on infrastructure development in the span of five years is the biggest news for the sector keeping in mind the current state of huge crash crunch in the economy. With this the sector will be impacted towards expansion but the benefits will be observed in the later years. A support to the developers with the infusion of 22,000 crore to the Infrastructure Pipeline on the other hand setting a liquidity constraint on NBFCs and HFCs will be added in the future which will result in actions being limited and under the government jurisdiction. The new personal income tax regime for middle-class taxpayers by slashing the percentage to 10% from 20% is a big move and will eventually strengthen their buying power for investment in the real estate. The deduction of Rs 1.5 lakh for loan sanction with regards to affordable housing has been extended by one year which will minimally benefit both buyers and developers and give them some more time to pay back. The budget sentiment is positive and the funding has been spread across other sectors keeping a balance of inflation of the country.”
Dr Niranjan Hiranandani, National President, NAREDCO, says, “Direction wise, it is a good budget; the Finance Minister has covered almost all major sections of the economy in her proposals. Having said that, I would say that the amount allocated for the proposals seems grossly inadequate, this is a concern. Secondly, the proposals seem structured for medium to long term results, we do not see anything which would have an immediate impact, would kick-start the economy. Thirdly, the liquidity issue which is a major challenge for the economy in general and real estate in particular, here too one does not see any major relief. For real estate, ‘affordable’ remains the government’s favourite in housing, with the previous tax exemptions for both homebuyers and developers being continued for one more year. Commercial real estate segments may witness a boost, with the focus on warehousing, data centres, schools, hospitals and hospitality. Again, the market reality is that there is a difference between ‘circle prices’ and the price points at which transactions are actually taking place, provision for this could have been done.”
Sanjay Dutt, Managing Director & CEO, Tata Realty and Infrastructure, shares, “The 2020 Union Budget outlined Aspirational India, Economic Development & Caring Society as the key focus areas. A lot has been attempted in the budget to address this. Thrust on accelerated infrastructure development is meaningful. The launching of Rs 103 trillion infra projects and focus on accelerating highways construction will also boost the infrastructure of the country. Tax benefit to Power Generating companies on the lines of new manufacturing companies, 15 per cent Corporate Tax is certainly a welcome move as it will support industrialization as well as generation to meet future demand. However, from the real estate sector point of view, it had been disappointing. It has only touched the outlines of Affordable Homes tax benefits to the developers from timelines perspective, allowing an extension by one year to avail tax benefit. On the brighter side, we are pleased to know about the government’s focus on the introduction of a policy to build data centre parks throughout the country. We, at TRIL, have already aligned our business strategy towards these developments in the commercial real estate sector, with the launches of two IT centres, Intellion Park and Intellion Edge in Gurgaon, as well as the upcoming Intellion Park that is planned to launch in Mumbai. Overall, we would have liked to see a few of the several long- standing needs of the real estate sector be addressed such as granting of the industry status, one time roll- over, tax on unsold inventory, tax to individual investor for notional income on second or third home, offset of loan interest from income, developer subvention and RERA as single body for customer grievances. After witnessing the slew of supportive initiatives last year, we had high expectations from the first budget of the decade to be able to bring the real estate sector back on the path of sustainable growth. We are hopeful to see the government take measure to correct these in the future as we look forward to being a part of India’s growth story by lending the TATA name to the building and construction of India’s future.”
Lincoln Bennet Rodrigues, Founder and Chairman, Bennet & Bernard Group, says, “The Union Budget 2020 had very few measures for the real estate sector which is one of the major contributors to India’s GDP. Apart from the personal income tax relief and few sops for affordable homes, there have been pressing concerns in the real sector that have not been addressed. There was an urgent need to address the challenge of liquidity faced by the sector, especially after the NBFC crisis. The budget could also have revived the Input Tax Credit for housing sector to provide relief to developers and home buyers, where-in homes could have been made available at lower cost. Some of the other aspects that the government that could have been addressed in the budget are granting of industry status to the overall real estate sector and implementation of single window clearance. A key expectation was the restoration of income tax benefit on a second home which would have benefitted home buyers in a big way and also stimulated the real estate sector. Going forward, we hope that the government takes more developer and investor-friendly initiatives for the betterment of the real estate market in the near future.”
Rohit Poddar, Managing Director, Poddar Housing and Development and Joint Secretary, NAREDCO Maharashtra, says, “The real estate sector was expecting to see big-ticket reforms from Union Budget 2020-21. While the Government had announced a slew of reforms last year, the real impact is yet to be seen on-ground. The government in Budget 2020-21 has provided a direction in which it wants to go in terms of infrastructure and rural development spends. Hopefully, over the next few months, the implementation will take place, which will revive India's consumption-led economy.”
Bijay Agarwal, Managing Director, Salarpuria Sattva Group, says, “The union budget presented is quite visionary and drafted keeping the New India in mind. There are several infrastructural development foreseen by the government which will boost the economy and job opportunities in India. Providing options to individual tax payers will provide flexibility for spending or saving the money by their own choice and it may increase the purchasing power of the consumers. Extension of timeline for benefit on affordable housing for the developer is in the line of government intention to provide houses to every citizen. Abolishing of DDT ad IPO for LIC will bring opportunities for fund inflow from foreign investors. But these changes should have been also considered positively for our own Indian investors/promoters.”