With the agrarian distress running deep and the next general elections approaching, finance minister Arun Jaitley was under pressure to deliver a budget that would keep a balance between growth concerns and electoral demands. He also had to reckon with fiscal challenges. As a result, real estate failed to get due attention in the budget. It must be mentioned here that the loss of jobs is one of the prime concerns today and the real estate sector is one of the largest job generators.
Reeling under the triple whammy of demonetisation, Real Estate Development and Regulation Act (Rera) and Goods and Services Tax (GST), the real estate sector was expecting ‘industry status’ as relief in the Union budget 2018-19. However, that hope has not been fulfilled.
The budget did not comply with the sector"s demand for reduction in GST rates to attract homebuyers. The sector had also expected some tax sops from the finance minister. However, that wish too has not been granted. Nor did the finance minister extend any concessions in relation to external commercial borrowings for the sector. The budget also stayed silent on the sector’s plea for rationalisation of stamp duty to bring down transaction costs.
After the roll-out of Rera, developers are liable to pay penalty in case of project delays. Given that, developers were expecting provision of a single window clearance to help developers avoid unnecessary delays in obtaining statutory clearances and approvals. That are also remained unaddressed.
However, Jaitley has made a small concession by proposing 5 per cent circle rate valuation. The sector has a bad reputation for attracting black money. There have been several instances in the past when a lower selling price was quoted to lower stamp duty burden, hitting government revenue. So, circle rates were standardised. But it failed to attract homebuyers as the difference between the selling price and the circle rate value was seen as unaccounted money and both buyer and the seller were taxed.
The finance minister has amended section 43 CA to allow market transactions up to 5 per cent below the circle rate, without the risk of the gap being construed as income in the hands of seller and buyer. Maintaining its focus on affordable housing, the budget has targeted to build 3.7 million houses in urban areas and 3.7 million in rural areas. He has also proposed to set up an affordable housing fund under National Housing Bank, which can spur activity in the real estate sector, pushing up demand for homes.
The budget has kept focus on government’s flagship schemes like Affordable Housing, Smart City mission and Atal Mission for Urban Rejuvenation and Transformation (AMRUT). It has proposed allocation of Rs 6,169 crore Smart Cities mission, a 52 per cent jump over the current year. It has hiked allocation for the AMRUT by 20 per cent – Rs 6,000 crore as against Rs 5,000 crore for the ongoing fiscal. Spending on Smart Cities and AMRUT will give a fillip to activities in the real estate sector. The implementation speed of these umbrella infrastructure projects will be key to the development in associated sectors, which we are very eagerly looking forward to.
(The writer is CMD, Rudrabhishek Enterprises)