Union Budget 2019 – What is in it for Real Estate?

2 min read

Headline: Union Budget 2019 – What is in it for Real Estate?

Hello Readers,

The Union Budget 2019 is just freshly brewed, and we look at it with enthusiasm. On the housing side of things, an increase of INR 1.5 lacs in tax exemption over the 2 lacs existing limit for affordable housing buyers will make a lot of fence sitters jump. Yes, the time for buying that new house could not have been sweeter.

NBFCs come under the RBI umbrella and the sound NBFCs will get a great boost as public sector banks can look at their asset pools, boosted by a central partial guarantee.

All the key points that affect the real estate industry directly or indirectly are listed below for quick reckoning.

  1. Rental Housing – Current rental laws are archaic as they do not assess the relation between the lessor and lessee in a fair manner. The government will look at improving the laws, she says.
  2. India’s FDI flows in 2018-19 remained strong compared to global at $54.2 billion, 6 percent higher than last year.
  3. The government is contemplating organising an annual global meet to get all three sets of global players: Industrialists, corporate leaders, corporate sovereign and venture funds
  4. Nearly 1.95 crore houses are proposed to be provided to eligible beneficiaries under the Pradhan Mantri Awas Yojana, she points out. The completion of houses that required 314 days in 2015-16, it has now come down to 114 days since 2017 – Awesome
  5. Nearly 1,25,000 km of roads will be upgraded under Pradhan Mantri Gram Sadak Yojana at estimated cost of nearly Rs 80,200 crore – More roads is great for Real Estate
  6. The government plans to allow FPIs to Subscribe to listed debt papers of REITs and InviTs
  7. Opinion: Providing land from public sector enterprises for affordable housing will help solve land acquisition problems.
  8. The government proposing to streamline multiple labour laws into a set of ‘four labour codes’
  9. Move for moving minimum public shareholding for listed companies from 25 percent to 35 percent must be implemented carefully. Timing, applicability, etc. to be closely evaluated – we do not want this to be another “forced sale”. Good opportunity for institutional capital and funds.
  10. The government is developing 17 iconic tourism sites as world-class tourist centres to improve the flow of domestic and foreign tourists to these destinations. Documentaries with anthropological details will be stored for tourists.
  11. Record recovery of over Rs 4 lakh crore have achieved over last 4 years. Provision coverage ratio is at its highest in 7 years and credit growth has improved to over 13%.
  12. The government has proposed to allocate Rs 70,000 crore for PSU Bank recapitalisation. – Opinion: Capital is definitely core to banks for expanding credit, earning interest and growing their balance sheets, so that they can drive economic activities. The recapitalisation was needed and is a timely impetus. However, some radical changes like relaxing the statutory requirement of Government to hold not less than 51 percent of the paid up capital in PSU banks should have been considered.
  13. For purchase of high-rated pooled assets of financially sound Non Banking Finance Companies amounting to 1 lakh crore rupees during 2019-20, one-time six-month partial credit guarantee to be given to PSBs
  14. The government proposes Rs 100 lakh crore investment for infrastructure over 5 years.
  15. Opinion: In continuation to bolstering MSME sector growth, interest subvention of 2 percent announced for fresh or incremental loans. This keeps the supply chain intact and registered assesses get additional buoyancy in this sector.
  16. Currently, 25% corporate tax rate is applicable to companies with an annual turnover of up to Rs 250 crore. This has been extended to companies with turnover of up to Rs 400 crore. Only 0.7% companies will remain outside of this 25% rate.
  17. An additional deduction of Rs 150000 on interest on loans borrowed under affordable housing. – Opinion: Interest deduction up to Rs 3.5 lakh for affordable housing as against Rs 2 lakh earlier now to be available until March 31, 2020. Measure expected to drive sales and encourage fence-sitters back into the real estate market.
  18. FM Nirmala Sitharaman proposes measures to carry forward and set off losses for startups and increase in period of exemption of capital gains from the sale of residential house for investment in startups up to March 2021.
  19. On NBFCs, one good measure announced was providing RBI with more power. RBI can do a quick stress test of NBFCS and reassure markets on their actual strength and weakness and measures to ease them over a period of time. RBI can help assuage the uncertainty on that front.
  20. No announcement so far on any change in income tax rates.

Looking forward to a buoyant and positive year ahead.

  • The Square Yards Content Team
Resident Editor