Union Budget 2018 for Real Estate: Affordable Housing For All Scheme & more

Here is what Finance Minister Arun Jaitley offered Indian real estate sector in Budget 2018.

Here is what Finance Minister Arun Jaitley offered Indian real estate sector in Union Budget 2018. It offers a lifeline to the real estate sector.

Union Budget 2018: Real Estate Sector Welcomes Housing For All Scheme

Union Budget 2018 for Real Estate_ Affordable Housing For All Scheme & more

Finance Minister and Minister of Corporate Affairs – Arun Jaitley presented Budget 2018 in Parliament on Thursday, 1st February. Budget 2018 was majorly focused on agriculture and farmers, but announcements for the affordable housing sector pleased the real estate sector too.

The Indian real estate sector sees Union Budget 2018 as a balanced one with focus on affordable housing. However, Union Budget 2018 will not have any direct impact on the housing sector as the expectations of concessional GST for housing sector overall was not met, said real estate experts.

Affordable Housing Fund (AHF)

Affordable Housing Fund (AHF) - Union Budget 2018 India

 

Affordable housing continues to be the main focus of the government in the real estate sector, with finance minister Arun Jaitley said, while presenting the Union budget in Parliament. Government announces to set up a dedicated Affordable Housing Fund (AHF) in National Housing Bank (NHB), funded from priority sector lending shortfall and fully serviced bonds authorized by the Government of India.

Last year, the affordable housing segment had received industry status in the Union Budget and support from the Centre under the newly introduced regulation in the Pradhan Mantri Awas Yojana (PMAY).

From the real estate investor’s perspective, affordable apartmentsare easier and more profitable to sell or even let out, ensuring decent return of investment. Urban India has a severe shortage of housing, yet Indian cities have many vacant houses.

National Housing Bank (NHB)

National Housing Bank (NHB) - Union Budget 2018 India

 

National Housing Bank Act, 1987 is being amended to transfer its equity from the Reserve Bank of India to the Government. Indian Post Office Act (1898), Provident Fund Act (1925) and National Savings Certificates (1959) are being amalgamated and certain additional people friendly measures are being introduced.

In line with the government’s aim to provide “Housing for All by 2022” mission, the Union Budget on Thursday proposed to set up an affordable housing fund in the National Housing Bank (NHB).

To provide the Reserve Bank of India an instrument to manage excess liquidity, Reserve Bank of India Act is being amended to institutionalize an Uncollateralized Deposit Facility. Securities and 23 Exchange Board of India, Act 1992, Securities Contracts (Regulation) Act 1956, and Depositories Act 1996, are being amended to streamline adjudication procedures and to provide for penalties for certain infractions. These proposals are in the Finance Bill.

GST on Affordable Housing

GST on Affordable Housing - Union Budget 2018 India

 

‘Housing for all by 2022’ is one of the pet projects for the government and it wants to deliver 10 million houses under this program. Out of 10 million, 95% of the houses are to be constructed for Economically Weaker Sections (EWS) and Low Income Groups (LIG).

As the affordability of this segment and the house value is low, the impact of slightest upward cost pressure is magnified and becomes a deal breaker. The current GST rate of 18% coupled with 1/3rd abatement for land is adding huge upwards pressure on the overall cost of house.

GST on affordable and low-cost housing units to be lowered from 12% with 50% abatement for land taking the effective GST rate to 6%. This will provide a boost to the cause of housing for all by 2022.

Real Estate Investment Trusts (REITs)

Real Estate Investment Trusts REITs Union Budget 2018 India

 

The Government of India and market regulators has taken actionable measures for development of monetizing vehicles including Infrastructure Investment Trust (InvIT) and Real Investment Trust (ReITs) in India. The Government would initiate monetizing select CPSE assets using InvITs from next year.

REITs are designed especially for defensive investors who are focus not on large gains but more on consistent income.

  1. Equity REITs: they are the owners of large real estate properties. What they own are big shopping malls, large office spaces, massive residential townships etc. Equity REIT funds make money by giving these spaces to tenants on lease.
  2. Mortgage REITs: Unlike Equity REIT, they are not the owners of any properties. They have only finances the debt for those real estate projects. Means, they get the EMI’s against those properties (from the developer / builder / owners).

According to market research reports and estimates, Indian real estate is likely to provide investment opportunity worth up to $77 billion through REIT-eligible commercial office and retail, properties across the country’s top seven cities by 2020.

Circle Rates

 

Circle Rates - Union Budget 2018 India

 

Currently, while taxing income from capital gains, business profits and other sources in respect of transactions in immovable property, the consideration or circle rate value, whichever is higher, is adopted and the difference is counted as income both in the hands of the purchaser and seller. Which levies tax on the difference between Transaction Value and Circle rate.

In order to minimize hardship on transactions in the real estate sector, Finance minister Arun Jaitley proposed that no adjustment shall be made when the circle rate value does not exceed 5% of the consideration.

The proposed measure may benefit buyers and sellers in property markets where prices are rational and are not under influence of investors.

Smart Cities Mission

 

Smart Cities Mission - Union Budget 2018 India

 

In the Smart Cities Mission by Government of India aims at building 100 Smart Cities with state-of-the-art amenities. 99 Cities have been selected with an outlay of Rs 2.04 lakh crore. These cities have started implementing various projects like Smart Command and Control Centre, Smart Roads, Solar Rooftops, Intelligent Transport Systems, Smart Parks.

Projects amounting to close to Rs 2,235 crore have been completed and works of Rs 20,852 crore are under progress. To preserve and revitalize soul of the heritage cities in India, National Heritage City Development and Augmentation Yojana (HRIDAY) has been taken up in a major way.

Union Budget 2018: Focus on connectivity to boost real estate

Roadways: Union Budget 2018-19 gave a massive push to the national highways as the budgetary allocation was earmarked at Rs 71,000 crore, up from previously allocated Rs 61,000 crore during 2017-18
Railways: Highest-ever budget allocation at Rs 1.48 lakh crore was witnessed in Budget 2018 towards railways development.
UDAN: Under regional connectivity scheme of Ude Desh ka Aam Nagrik (UDAN), about 56 unserved airports and 31 unserved helipads shall be connected.

Here are how hot-shots of the real estate industry reacted to Budget 2018:

 

REAL ESTATE EXPERT SPEAKS_ UNION BUDGET 2018 India

 

Dr Niranjan Hiranandani, President, NAREDCO (National Real Estate Development Council):

Mr. Hiranandani welcomed the budget 2018 presented by Finance Minister Arun Jaitley. From the perspective of real estate, he rated the budget 3 out of 5 and also welcomed the government’s move of an affordable housing fund in the National Housing Bank The NAREDCO chief also appreciated the move by the government towards Suburban Railways in Mumbai. The government has decided to get Rs 11,000 crore to the project. He said, “Improved railway network and accessibility generally have a positive multiplier effect on real estate.”

Mr. Manoj Gaur, Vice President CREDAI-National & Managing Director, Gaurs Group:

Welcoming this year’s union budget 2018, Manoj Gaur said that heavy allocation of funds towards infrastructure upgradation will help the nation’s development. However, he did share his concerns about the budget. He said that presentation missed on providing the much-needed cushion to the realty sector. Since the budget 2018 was the first after the implementation of RERA and GST, Mr. Gaur said he had hoped for certain incentives for this sector. He did welcome the government’s commitment to achieve ‘Housing for All’ by 2022.

Mr. Deepak Kapoor, President CREDAI-Western U.P. & Director, Gulshan Homz:

Deepak Kapoor welcomed the government’s move towards MSMEs. Mr. Kapoor said that the budget 2018 may not have addressed the tax structure for the general masses, but it did provide benefits to MSMEs (Ministry of Micro, Small and Medium Enterprises). Mr. Kapoor said that government’s move to extend the corporate tax rate of 25 percent for companies with an annual revenue up to Rs. 250 crore is much appreciated. The reduced tax burden on corporates might allow real estate to see new start-ups and increase job opportunities.

Mr. Gaurav Gupta, General Secretary CREDAI-Ghaziabad & Director, SG Estates:

Gaurav Gupta noted the focus on job-creation in the infrastructure sector in the Union Budget 2018. He also said that though there wasn’t any direct benefit accorded to the realty sector this time, the proposal to develop 4 lakh kilometers of road and upgrading rural infrastructure will greatly bring up the Tier 2 and 3 cities of India on the realty map. Mr. Gupta said this will help boost housing demand and investment opportunities for those regions.

Abhishek Bansal, Executive Director, Pacific Group:

The Pacific group chief, Mr. Bansal was optimistic about the Government of India’s interest towards enhancing infrastructure in the country by proposing an amount of Rs. 50 lakh crore. He did, however, mention that the real estate sector missed out on any direct incentive, but hoped that better infrastructure and connectivity will pave way for greater housing and commercial demand in the developing regions.

Union Budget 2018 Highlights:

Watch Union Budget 2018-19: Finance Minister Arun Jaitley’s full speech

 

Download Arun Jaitley Union Budget Speech 2018 PDF

 

Download Arun Jaitley Union Budget Speech 2018 PDF

 

Here is the PDF link of Full Text of Arun Jaitley’s Union Budget 2018 Speech

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