Finance Minister Nirmala Sitharaman presented the Union Budget 2019 on July 5th and also stated that the Indian economy was at approximately 1.85 trillion US Dollars in 2014, within 5 years it has reached 2.7 trillion US dollars. Indian economy is growing at a rapid rate and will grow to 3 trillion dollars in the current year.
While the real estate sector had a list of demands for the Union Budget 2019-20, let’s look at what Nirmala Sitharaman managed to give the sector in the budget and which demand were unheeded.
Tax benefit for affordable home buyers
This budget continued to push the affordable housing sector permitting an additional deduction of Rs. 1.5 lakh for interest paid on loan borrowed for an affordable house valued at up to 45lakh. This is expected to drive sales and bring fence-sitters back into the marketplace, within this financial year.
Skill development initiatives
Under the ‘Pradhan Mantri Kaushal Vikas Yojana’, the Government has announced various measures to widen the skill development program as the realty sector requires skilled workers to handle technology and new-age tools. The government has the vision to train 10 million youth under the initiative and acquire skill sets in Artificial intelligence, Virtual reality, 3D printing, etc.
A solution to funding issues
Real estate sector has been facing a debt crisis and liquidity crunch and several measures were announced in the Union Budget 2019 for the revival of non-banking financial companies (NBFC’s). The government announced a one-time, six-month credit guarantee for the purchase of pooled assets, of highly rated NBFCs up to Rs 1 lakh crore. The government has also allowed the FIIs and FPIs to invest in debt papers of NBFCs. This will give a boost to the much-needed liquidity of NBFCs.
Housing for all by 2022
The government aims to achieve ‘Housing for all by 2022’ through Pradhan Mantri Awas Yojana (PMAY) and has sanctioned 81 lakh houses under PMAY-Urban and 1.95 crore PMAY-Rural. An exemption of Rs 1.5 lakhs in income tax on home loans under affordable housing is also provided in this budget. The overall budgetary allocation for PMAY, however, remains in line with that declared in the interim budget, at Rs 25,853.26 crore, of which Rs 19,000 crore is allocated for PMAY-G and Rs 6,853.26 crore for PMAY-U.
Expected outcomes
– Funding issues because of the distress in the NBFC sector are expected to resolve as the government is expected to ease the External Community Borrowing (ECB) norms to ensure a steady flow of capital from foreign investors.
– This budget will boost affordable housing and should help in increasing developers’ access to funds, for the development of affordable housing projects, in addition to initiating rental housing.