Budget 2019: Not much for real estate sector besides boost for affordable housing

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Budget 2019 India: With a focus on boosting housing demand, the Budget has provided several direct and indirect benefits. The proposal to further enhance interest deduction of `1.5 lakh in addition to the current `2 lakh on loans taken for residential houses of up to `45 lakh is expected to boost demand for affordable housing by providing tax incentives on loans taken for purchase of houses in this category.

Ashish Puravankara, MD, Puravankara Ltd, said, “The deduction of `1.5 lakh on home loans under affordable housing will boost demand.” Kamal Khetan, CMD, Sunteck Realty, said the deduction on interest on housing loan has been increased from `2 lakh to `3.5 lakh, which will drive volumes.

The Budget proposes reform measures to promote rental housing. The FM said current rental laws are ‘archaic’ as they do not address the relationship between the lessor and the lessee ‘realistically and fairly’, and, therefore, a model tenancy law will be finalised and circulated. The industry has welcomed the move. Bhairav Dalal, partner and leader (real estate tax), PwC India, said, “Laying down a roadmap for rental housing is a step in the right direction to align with global trends of co-living spaces.” As per Pankaj Kapoor, MD, Liases Foras, affordable rental housing schemes have been a long-pending demand. “It is taking baby steps to introduce affordable rental schemes in urban agglomerations to provide cheap accommodation to migrant workforce. Steps like revising tenancy laws would add more confidence,” he said.

Meanwhile, foreign portfolio investments (FPIs) will be permitted to subscribe to listed debt securities issued by ReITs and InvITs. Sanjay Dutt, managing director and CEO, Tata Realty & Infrastructure, said, “This would lead to an influx of investment in the cash-strapped sector.”

Gaurav Karnik, national leader (real estate), EY India, said so far FPIs were not allowed to invest in the debt instruments issued by investment trusts. “Some of the ReITs and InvITs that have come into the market have a debt component but foreign investors could not subscribe to the issue because they were allowed to invest only in securities or units of the trust. This is a good move because now investment trusts will be able to raise more money at a lower rate and make the structure more efficient.”

Further, the proposal to purchase of high-rated pooled assets of financially sound NBFCs, amounting to a total of
`1 lakh crore during the current financial year, and one-time six months’ partial credit guarantee to public sector banks for first loss of up to 10%, will address liquidity challenges for developers. The move to enhance metro rail connectivity through PPP model is welcome. Ashish Jain, partner, Cyril Amarchand Mangaldas, said, “This will result in more transit-oriented development and commercial activities around metro corridor.”

There were a few misses too. Anuj Puri, chairman, ANAROCK Property Consultants, said, “We may not see consumers and investors return to the market, except in low-cost housing. Industry status remained elusive, taxes not sufficiently moderated and land reforms not mentioned at all.”