How infrastructure status will change the reality for real estate

The Union Budget 2017-18 was announced with the theme of Transform, Energies and Clean India (TEC) was largely geared towards rural growth, infrastructure, and poverty alleviation, with a huge impetus to affordable housing. After a wait of several years, the government has finally awarded infrastructure status to the largely-neglected affordable housing, which is encouraging for developers. Infrastructure status will ensure easier access to institutional credit and help in reducing developers’ cost of borrowing for affordable project.

Further, the government has tweaked the definition of Affordable Housing projects under the scheme for 100% deduction of profits from tax of an undertaking. Earlier, flats up to built-up area of 30 sq. meters in four metro cities and up to 60 sq.

Moreover, this time period has extended from three years of approval to five years. For instance, households earning up to Rs 200,000 per annum and above poverty line itself accounts for almost half of the total demand for housing between 2017 and 2020

In order to cater to the supply, the government has targeted to build 1 crore houses by 2019 for homeless and those living in kuchha houses. Moreover, the industry will also be enthused by the Finance Minister’s allocation of Rs 23,000 crore towards Pradhan Mantri Awas Yojana, which is almost a 53% increase from that of last year. 


Housing developers have been suffering from major cash flow problems in the past couple of years as there is substantially high unsold stock in most of the cities due to the suppressed housing demand. The demonetization has compounded their problems with a further slowdown in sales. This measure provides them with some relief and the opportunity to focus in pushing the sales of their stock. 


Another matter for cheer was for joint development agreement signed for development of property; the liability to pay capital gain tax will arise in the year the project is completed. This will help in creating more positive demand for land assets for future developments. 


Transportation, including rail, roads, shipping, which has received a provision of Rs 2,41,387 crore 2017-18 along with specific announcements of creating over 3500 km of rail network and 1.40 lakh km of road network will ensure greater accessibility thereby creating more nodes of economic development. Further the proposal of having a METRO policy is a welcomed move.

Scrapping of the Foreign Investment Promotion Board (FIPB) would further pave the path for foreign companies to invest in India. At a time when the government is pursuing its ‘Make in India’ mission and further liberalizing FDI norms across sectors, this move will go a long way in reducing bottlenecks for foreign investors from certain sectors such as defense, aviation, banking in the country. 

Further, as many from the real estate sector had commented before the budget, some additional benefits for first time home buyers could have been included to provide the additional impetus. 


Over all this is an extremely sensible budget that focuses on promoting long term and sustainable growth even as the country and its economy face many headwinds from global issues such as BREXIT, US politics, increasing oil prices and general uncertainty.” 


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