Budget 2020 Expectations for Real Estate: Ahead of the Union Budget 2020-21, we expect the government’s continued focus on infrastructure development and nation building. Given the fact that the economy has settled down post multiple measures and layers of reforms, there are several expectations from the Union Budget to fuel consumption, increase demand in the market and aid the economy on its way to achieve higher growth rates, yet again.

While the budget is expected to push areas of economic growth, a few macro-economic reforms are on the anvil. These are expected with respect to the rationalisation of direct and indirect tax rates; consolidation of GST rate slabs; and large institutional reforms, specifically within the education sector.

Given the impetus and stimulus that the government in recent times has extended to the realty sector, it is heartening to note that despite a formal industry status (which has long been demanded) not being accorded, the sector is still being treated as an industry. This is indicative of the government seeing the sector as an engine of economic growth and employment generation.

Here is what to expect from the Union Budget 2020-21:

FINANCIAL MEASURES

1. To redress the core crisis of liquidity in the sector, the government will need to take a stable policy direction for taxation and reforms in land and labour.

2. We hope to see an attractive proposition for money lending and cheaper Financial Institution (FI) borrowing.

3. Lower / clubbing of GST rates are expected in certain cases, where basic raw materials like steel, cement etc. are unburdened.

# Include ITC benefit in GST for under-construction homes to reduce the burden on end buyer, giving an impetus to under construction projects in residential.

4. Reduction in import duty on steel, coal, sand etc.

5. The government should look at the possibility of creating a securitization market to free up capital and measures to boost participation in the global bond’s market.

Watch: Budget 2020: Your income tax burden may come down – Top 5 Expectations

REAL ESTATE MEASURES

1. The Real Estate Regulatory and Development Authority (RERA) which is moving towards the creation of common open platform (COP) needs to be strengthened.

2. National Infrastructure Pipeline (NIP) is expected to create a ripple effect for boosting demand in real estate sector. This however requires the government to create transparency around land ownership and pooling.

3. Rental Housing to receive a boost.

# The draft Model Tenancy Act, 2019 that has been devised to boost supply in the rental housing segment makes renting more lucrative for both landlords and tenants# It bridges the gaps that currently exists in policies regulating the rental housing segment# It is advisable that poor/homeless/migrants should be provided with dwellings that have a rental rate of Rs 2,000 to Rs 2,500 per month# Student population which is still not independent should have a rental outlay of Rs 5,000 to Rs 6,000 per month# White-collar employees (LIG/MIG)should have a rental outlay of Rs 20,000 to Rs 25,000 per month# The above should lay the ground, for creating a critical mass for Residential REITS

4. Extend the Rs 2 lakh tax rebate on housing loan interest rates under Section 24 of the Income Tax Act, in order to boost housing demand.

5. Further impetus is required to attract private sector investors in affordable housing. Although the segment has been given infrastructure status, it is proving difficult for developers to get capital from Banks and NBFCs at lower interest rates, making these projects not so lucrative.

6. The recently introduced lower 15% tax rate for companies looking to set up new factories will only be effective if land acquisition is made easy, through land reforms. This will also help foreign investors to enter the sector, making the approval process of real estate projects smoother.

REVIVING HOUSING FINANCE

1. The government’s move to aid the market by setting up Alternative Fund Investment of Rs 25K crore to revive the realty sector must be implemented at the earliest. It is critical to provide relief to developers and improve buyer sentiment, considering the current situation.

2. The ongoing liquidity crisis enveloping all sectors can be handled by easing liquidity in the market especially for developers, through increase in capital flow and stable supply of fully constructed homes. This will also deter unreasonable pricing in the sector.

3. As alternative instruments of finance to revive the sector, the government should consider Housing.