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There has not been any precedence of major interest rate cuts, ahead of the union budget’s presentation. On the contrary, major financial policy decisions are put on hold or deferred, ahead of the budget. However, this time, prime minister Narendra Modi announced an interest subvention scheme on the eve of the new year and it was soon followed by banks cutting their interest rates. Consequently, many stakeholders in the Indian real estate sector, believe that further substantial measures may be in store, in the union budget 2017-18.
What developers want, from the union budget
Kaizad Hateria, brand custodian and chief customer delight officer, Rustomjee Group, says that developers are expecting regulation of norms, which will enable seamless transactions for customers, as well as developers.
“For example, we would like to see clarity and uniformity in development control norms, single-window clearances, time-bound approvals, making cluster redevelopment schemes more attractive, better FSI and TDR norms and seamless flow in stamp duty taxation. We expect sops that bring clarity and benefit the customers. Also, with the implementation of the Real Estate Regulation Act (RERA), we foresee confidence coming back among buyers,” says Hateria.
Other common demands include tax benefits for affordable housing, reductions in home loan interest rates and relief in income tax for individuals. Vivek Mohanani, joint managing director, Ekta World, believes that “2017 will mark the beginning of a new chapter of growth in the realty sector, enabled by the reduction in interest rates, increased FDI and increase in loan portfolios. With the government giving sufficient interest rate cuts as a precursor, the realty sector is very upbeat about the union budget,” says Mohanani.
High expectations for big announcements in Budget 2017
Several analysts point out that the rate cuts were the result of a ‘crisis management’ approach adopted by the policy makers. Had it not been the case, the announcements could have easily been made in the budget speech. However, the government felt that it was better to offer something instantly, while other sops for the home buyers were being worked out. Sources in the finance ministry also confirm that the government may consider higher tax incentives on home loans, to boost the real estate business, which has been the worst affected by demonetisation. Moreover, the government cannot afford to ignore the sector, if it wishes to realise its mission of ‘Housing for All’.
With banks now flush with funds after demonetisation, tax concessions may not only bring the sector (which contributes significantly to GDP) back on track, but also benefit middle-class Indians across the country. Hence, there is hope that the interest rate cuts and subvention schemes that were announced recently and referred to as the ‘mini-budget’, are mere precursors to a substantial bonanza package in the union budget 2017-18.
Trends that indicate a major bonanza for home buyers in budget 2017
- The interest rate cuts that followed the prime minister’s year-end announcement, indicates that sops may be announced for home buyers in the union budget.
- There has been no precedence of a sudden rate cut, ahead of budget. This suggests that the need for a ‘feel good’ factor was immediately felt, while other big measures were being worked out.
- Tax incentives to home buyers, clearly indicate that the government wants to reach out to middle-class home buyers post demonetisation.
- Sources in the finance ministry say that specifics for home buyers in budget, are being worked out.
(The writer is CEO, Track2Realty)