Sunil Agarwal, Associate Dean and Director, School of Real Estate, RICS SBE reacts to the Budget: “We welcome the changes announced in today’s budget. In continuation of its focus on affordable housing, the government has announced a dedicated affordable housing fund and construction of 51 lakh affordable homes this year. Lending for affordable housing will become a priority, which should encourage more private sector developers to build affordable homes. It will also add to the existing demand momentum for affordable homes. We are delighted to see that the government has recognized the challenges of rapid urbanization and is taking efforts to meet them. It is however disappointing to see that the real estate sector has once again been denied industry status.”
Union Minister for Finance, Arun Jaitley laid out plans for the future of India’s economy in the Union Budget of 2018. RICS believes the government has offered a positive budget with special focus on the rural economy, agriculture, MSME’s, education, health care and infrastructure sectors. Agriculture and rural economy was the running theme of the Budget, with the honourable Prime Minister Shri Narendra Modi calling for doubling of farmer income by 2022 to mark India’s 75th year of independence. On the whole, the decision to invest in agriculture and rural infrastructure is a wise one, considering the distress in the rural economy. The Finance Minister is confident that India’s economic growth will surge past 8 per cent, which is positive for all the sectors.
Key takeaways from the Budget for real estate and infrastructure sector
This year’s Budget, ignored most of the demands of the real estate sector. There was no mention of infrastructure status to the real estate sector or tax incentives for first time home buyers.
Affordable housing however did find prominent mention in the Budget. The government has stuck to its stated mission of providing a home to every poor by the year 2022. This year, the government proposes to build 51 lakh affordable homes.
The biggest takeaway for the real estate sector is the government’s proposal to establish a dedicated affordable housing fund under National Housing Bank for priority sector lending. This will ease lending for affordable housing projects. Last year’s Budget announcement of an industry status to affordable housing encouraged many private sector developers to launch affordable homes. We believe that easing of funding for affordable housing will have a similar effect. We are likely to see entry of newer players in this housing segment. Supply of affordable homes increased after the government accorded infrastructure status to this segment and we expect this trend to continue.
We are glad to see the government recognise urbanisation as an important challenge. An increase in urban population has increased the demand for basic services such as water, transportation, sewage treatment, low income housing in cities. The government has two interlinked programmes to address the urbanisation phenomenon-smart cities and AMRUT. AMRUT programme will focus on water supply to all households in 500 cities. Water supply contracts for 494 projects worth 19,428 crore has been awarded. So far, 99 smart cities have been selected with an outlay of Rs 2.04 lakh crore. It is good to know that these cities have started implementing the ambitious smart cities mission and about Rs 2350 crore worth of projects have already been completed. Around Rs 20850 crore worth of smart city projects are still under progress.
The other positive for the real estate sector is the government announcement that for income from capital gains tax, there will be no need to make adjustment in case circle rate does not exceed 5 per cent of sale consideration. This will make real estate transactions easier.
In what is a rare occurrence, protecting the environment found mention in the Budget. The government has recognized air pollution in Delhi-NCR (National Capital Region) as alarming and to mitigate this, the government has proposed to give subsidies for farm machinery to manage crop residue.
Infrastructure and construction:
Infrastructure remains a huge priority for the government. The Budget has increased infrastructure outlay from Rs 4.94 lakh crore to Rs 5.97 lakh crore. The Finance Minister, Arun Jaitley, said the country needs a massive investment of Rs 50 lakh crore in infrastructure to increase growth of GDP and integrate network of roads, ports, airports. The government is confident of completing national highways exceeding 9,000 km in 2018-19. India needs to spend billions and billions of dollars in building infrastructure, so this investment is much welcome.
Railway capex has increased by 25 per cent to Rs 1,48,558 crore from Rs 1,20,000 crore. Around 600 railway stations are being redeveloped. This year, the government plans to renew 3,600 km of railway tracks and around 4247 unmanned railway crossing in broad gauge network will be eliminated.
It is encouraging to see the government spend on upgradation of local rail network in the cities of Mumbai and Bengaluru. The government proposes to add 90 km of tracks to Mumbal’s local train network at a cost of Rs 11,000 cror . It has also allocated Rs 17,000 crore for Bengaluru metro network. The AAI (Airports Authority of India) has proposed to expand airport capacity to 1 billion trips a year.
Key measures that will impact real estate, construction & infrastructure:
- Affordable housing
- Govt to establish a dedicated affordable housing fund under National Housing Bank. It will ease lending to affordable housing sector.
· Tackling urbanisation
- Budget reveals that out of 100 smart cities, 99 cities have been selected with an outlay of Rs 2.04 lakh crore
- AMRUT programme to focus on water supply to all households in 500 cities. Water supply contracts for 494 projects worth 19,428 core awarded
- Infrastructure investment increased
Infrastructure remains a big priority for the government. The Budget has increased infrastructure outlay from Rs 4.94 lakh crore to Rs 5.97 lakh crore.
Railway capex has increased by 25 per cent to Rs 1,48,558 crore
The AAI (Airports Authority of India) has proposed to expand airport capacity to 1 billion trips a year