Home seekers across the major housing markets of India, were hoping for some announcement in Budget 2018 that would make it easier to buy their dream homes. Before the budget they had hoped for some reduction in income tax limits, lower rate of interest on home loans, reduction of GST and stamp duty and increase in the cap on interest and principal deductions. However, at the end of the one hour and 50 minutes speech by finance minister Arun Jaitley, many are disappointed.
Buyers opine that the sudden shift towards the rural and farm sector, in the last full budget presented by this government, indicates that this was election-oriented budget. The finance minister even announced a capital gains tax on equities. The stock markets, which rose ahead of the budget speech, too ended the day marginally lower.
Home buyers left dissatisfied
“We have weathered hard measures like demonetisation and GST, with the expectations that the government would encourage honest tax payers, in return,” says Swaraj Sehgal, an IT professional in Gurgaon. However, it seems that this government is no different from the tried and tested approach in Indian politics, where sops are announced for voters on the eve of elections, he laments. “Was it a budget speech or election speech?” questions Namrata Chauhan in Mumbai.
“Forget about incentivising the tax payers with a home purchase that has a chain effect on the economy at a macro level; this budget has completely ignored the basic needs of middle-class Indians across the major cities of India. When the government itself has revised its job creation target from two crore to 70 lakhs now, it is very obvious that home buying capacity of Indians will take a hit,” explains Chauhan, a real estate consultant.
Budget 2018 has a few positives, say developers
While developers too may be disappointed, they are not overly critical.
Ravindra Pai, MD of Century Real Estate, agrees that there were a lot of expectations from the finance minister in this budget, for real estate. “Unfortunately, other than some minor mention about a fund for affordable housing and increased allocation for ‘Smart Cities’, there is not really anything for real estate or home buyers,” he says.
Nikhil Hawelia, managing director of the Hawelia Group maintains that although there are certain positives, there are more disappointments with this budget. “The capital gains tax in the equity market, might bring the well-to-do middle class back to the housing market. Ever since the slowdown in real estate, the capital market has been the biggest beneficiary. However, I feel a reversal is possible now. Other than that, I do not find very many positives in this budget,” he explains.
Greater clarity needed on certain announcements
The finance minister has proposed that the government will set up a dedicated affordable housing fund in National Housing Bank. However, there is lack of clarity on the actual investments and expected impact. The same could be said about another promise of one crore houses to be built under the Pradhan Mantri Aawas Yojana (PMAY), in rural areas.
“There is too much talk about a ‘digital economy’. My point is, will we migrant professionals live in the digital space or in a house? In a city like Bengaluru, it really pinches to pay exorbitant rent but there is no incentive, even though the finance minister in his budget speech acknowledges the fact that our contribution with income tax is more than that of self-employed entrepreneurs. We are forced to pay taxes without any encouragement,” says Sudhakar Reddy, a finance professional.
Even women home buyers feel that the announcement to amend the Employees PF Act, to reduce the contribution of women to eight per cent from 12 per cent, with no change in the employer’s contribution, would hardly make any impact, as far as their purchase power is concerned.
“What I was looking for, as a woman, was some direct relief in creating an asset class like a house. Does the government even understand the financial security aspect of women, when offering symbolic reliefs? Similar is the case with relief to salaried taxpayers that proposes to allow standard deduction of Rs 40,000 in lieu of transport allowance and medical reimbursement,” points out Kavita Jain in Delhi.
In the first Union Budget after the implementation of GST, the middle-class was expecting a lot more, in terms of its dream of buying a house. It now, seems that they will have to wait some more.
Budget 2018’s mishits
- There was no incentive for home buyers in Budget 2018, even though the finance minister acknowledged the contribution of the salaried class.
- While the budget proposed more spending to the tune of Rs 3.5 lakh crores, clarity over fiscal consolidation remains elusive.
- Focus on job creation down from two crore jobs to 70 lakh jobs now.
- Home buyers, who were expecting some sops in the first budget after GST implementation, have been left disappointed.
(The writer is CEO, Track2Realty)