Budget 2020-21: Expectations of Indian Real Estate Market

Finance Minister Nirmala Sitharaman is all set to table Union Budget 2020-21 on 1^st February and the entire nation is excited to know what is going to come out of the kitty this time? Likewise, the Indian real estate market also has expectations. The impact of budget 2020 on real estate will decide the fate of the developers and the real estate investors. Thus, here is a glimpse of what Indian real estate market expects from the Budget 2020-21.

Expert Opinion:

Mr. Amit Raheja, CMD, Wealth Clinic expects that Union Budget 2020 will offer industry status to the real estate. This will simplify the process for land acquisition and will also increase the chance of fund availability at a low-cost. He also looks forward to an increase in NDFC liquidity as it will uplift the market sentiment. Currently, the realty market is dealing with massive liquidity crisis. Mr. Raheja predicts a boom in the market as the formulation of the Alternate Investment Fund, will prove helpful to complete the stalled projects. He further said that an increase in the interest paid on home loan will make buyers more confident and this will reflect positively on the business. The fulfillment of these expectations will pave way for meeting the deadline of PMAY Scheme by 2022, he said.

Top Budget Expectations of Indian Real Estate

Increase in Affordable Housing Subsidy – In the Union Budget 2020-21, the developers and realtors feel that Finance Minister Nirmala Sitharaman should bring housing units valued upto Rs. 65 lacs under the affordable segment. It is so, because a fair number of potential buyers prefer to buy a residential property between Rs. 45 lacs and Rs. 65 Lacs. This will record increase in affordable subsidy for the home buyers. Currently, the available deductions on interest paid for housing loans stand between Rs 1.5 lakh to Rs 3.5 lakh for houses valued up to Rs 45 lakh.

So, the definition of affordable housing is likely to be rephrased from unit value ranging till to the housing units measuring up to the specific area.

Simplify Land Acquisition – The introduction of a unique identifier [UID] for plotted land under the Digital India Land Records Modernization Programme (DILRMP) will simplify the land acquisition process. This process will also curb unfair land ownership across the country. The DILRMP process is predicted to boost the overall realty market as the land acquisition for setting up manufacturing units and plants will become a hassle-free process.

Increase Liquidity – This is a major expectation from the Union Budget 2020 as apart from setting up Alternate Investment Fund, the Union Government must also increase share in liquidity for NBFC [National Non-Banking Financial Companies] and Housing Finance Companies [HFC]. The National Housing Bank [NHB] has also incorporated Rs. 30,000 crores in HFCs to bring the market back on the track as the delay in housing projects due to lack of funds is affecting the property market badly. Thus, the announcement of funds for the liquidity-prone Indian real estate will act as damage control.

Rental Reform – The Model Tenancy Act is yet to be implemented in some states and thus the MoUHA i.e. Ministry for Urban and Housing Affairs must take corrective measures to implement the law. The ministry should focus on the execution of rental agreements and policy guidelines as it will boost the growth of the real estate business under various segments like co-living. The implementation of the Model Tenancy Act should be carried out at a fast pace to replace the traditional rental method.

Relaxation in Loan – The Government aims to strengthen the Indian real estate market and has already given a package of Rs. 70,000 crores to the Public Sector Banks to stabilize the liquidity crisis. But these moves are not sufficient to curb the damage and thus the Union budget 2020 must allow credit offtake on the corporate and personal loans.

The Union budget 2020 is going to set the stage for being a 5 trillion economy and thus it must inculcate several reforms and rebates for the real estate sector. After agriculture, the realty market is the second biggest job employer in India and the housing segment alone contributes 5-6% in the gross domestic product.