Union Budget for the real estate market

Union Budget for the real estate market

Everyone is eagerly waiting for the union budget which is soon going to be revealed. Demonetization has had a significant effect on the finances of the country and an impact has been seen on every sector. The union budget will give more clarity about the finances. Sahil Kapoor, Executive Director RE/MAX India talks about the expectations from the union budget for the real estate market.

Ever since RERA has been passed, the real estate industry has been going through a paradigm shift and a lot of answers are expected with the release of the upcoming Budget. With developers coming under the RERA scrutiny, there is a lot expected when it comes to approvals and clearances. In particular, we hope that government initiates the Single Window Clearance for smooth approvals and timely delivery of projects. As a Real Estate fraternity, we hope that this budget beings with it positive sentients and builds the customer trust back in the Real Estate Sector. The budget is expected to build around the lost faith of the buyer’s post Demonetization by incentivizing the home buyer with lower interest rates. Also, the first time home buyers particularly are expected to have a benefit with higher tax exemptions from the next financial year.

The union budget is expected to support the first-time home buyers. Their first house might get them additional income tax incentives for the first few years. The developers could also then come up with the products that suit the requirements of the youth to attract this segment of home buyers.

So far, in case of project delays, there was no concession or protection for the end users. This led to payment of extra taxes and other personal difficulties as well. The new budget is most likely to extend tax rebates in the projects that get delayed due to strict RERA adherence as well. If the government wants to fulfil the dream of “Housing for all by 2022”, then the union budget has to be made Real Estate friendly so that it’s beneficial for all.

The tax deduction limit for the housing loans should also be increased for buyers in the metro cities. Currently the limit is 2 Lakhs, which is insignificant considering the ticket size in the metro cities, where usually the houses go upto 1 Crore. Addition benefit on house insurance will encourage people to get their house insured and protected.

Currently, the HRA (House Rent Allowance) is not provided to all the salaried people. The one with a HRA avail tax benefits, but those who get a lump sum, without any breakup of the salary, they are just liable for a deduction of Rs 5000/month, which isn’t realistic, keeping in mind today’s housing rent. The union budget should be more in support of people with no HRA.

Moreover, in the long term we expect income tax rate rebates, Stamp duty reduction, GST rate to be finalized, tax concessions on house insurance premiums could be introduced to encourage end-users to insure their homes.

With the upcoming budget, we expect to get the industry status as deserved with all the economic reforms taking place. This will help in pushing the housing demand and eventually lead to growth of the industry. The announcements made by the Prime Minister MR. Narendra Modi will help the ultra affordable segment a lot.  The Home Loan rate cuts are having a positive impact on a wider customer segment. We just look for the confidence boosting measures by the government that will put more money in the hands of the home buyers and hence improve the home sales. the government needs to address the issues post demonetarization by encouraging the customers to have trust again and park their funds in real Estate.

RERA Implementation

How will the RERA implementation affect the real estate sector in a positive way

 With the government seeking advice from the industry experts for the RERA act,  it’s a good move towards building the Real Estate community stronger and making the act feasible for the industry to prosper in the right direction. The act has covered many aspects of the industry but still there are a few provisions in the act that are prejudicial to  the legitimate business of the brokers. There are a few changes that the government should consider keeping in mind the interest of the serious and professional brokers. For example the Single Window Clearance for the developers that will help them to avoid delays. Also, a few qualification barriers should be added for agent to be a registered broker. Apart from this, the government should also try and incorporate a few suggestions from the broker community to safeguard their business as well. 

RERA norms, will bring long-term fundamental changes in the Real Estate sector which is also set to gain from the increased transparency.

With the positive move in the right direction, buyers will feel secure for his investments and will help in regaining the market sentiments.

How will demonetization lead to a more organised sector in the coming year?

With the Ongoing Demonetization drive by the Government, we as Real Estate Industry are going to be the biggest benefiters in the long run.  The concept of parallel economy is going to be a thing of the past. This will also help our industry by making it stronger and transparent. With the transactions taking place through a transparent channel, the industry will grow towards becoming more organized and hence increase the general public’s trust in this industry.

In the Long run, bigger and structured companies are going to play a larger role in shaping up the industry and making it more professional with their business model and education system.

How all other changes in this year lead to more positivity in the real estate sector?

With the RERA coming in, the time has never been so perfect for the real estate industry to move in the right direction. Coupled with reforms like Demonetization, FDI in Real Estate and Benami Transaction Act; this industry is going to witness a ground-breaking change in the way real estate is dealt in India. The coming year 2017 is going to be  a great year for the industry and I assume that the annual sales of 2017 will be higher than the combined sales of 2015 & 2016. The significant change in the way business is conducted will also lead to the buyers regaining confidence. The Professional Realtors and Brokerage houses are going to prosper in the long run. 

Benefits of real estate as short term investment

Benefits of real estate as short term investment

In times where the market is facing volatile conditions, with stocks market often closing at a tip and interest rates recording at low, people are looking to park their money in short term investment rather taking in risks with long-term investment. Amidst the prevailing risks and chances with regards to options such as mutual funds, real estate market had turned out to be lucrative for many.

With the Reserve Bank of India reducing its benchmark interest rate by a higher-than-expected 50 basis points to a four-year low, the step has further encouraged the new home buyers to avail home loans at a much lower interest rate. Although, the banks have been slow in passing on the benefit to the home buyers, they have still deducted their home rates by 30 to 35 basis point.

Despite the advantages, many perceive the positives to be a temporary scenario and hence advice investing in other options as well, apart from real estate. However, another segment believes real estate to be one of the best option when it comes to short term investment option. Some of the benefits with short investment with real estate are:

It isn’t so risky: When compared to intangible nature of investments such as stocks and bonds, real estate provides much more assurance, as the prices of the sector do not get affected by daily media news. Besides, investing in real estate further secure an asset, which eventually tends to provide regular income stream, especially in case commercial space.

In proportion with the inflation: Undoubtedly, inflation in on the constant rise. As per the experts, real estate prices are directly proportional with the inflation. Therefore, with every rise in inflation, your real estate prices are set to surge. Therefore, with an investment today in real estate, the value of asset is set to appreciate in couple of years.

Maximising the benefit:real investment becomes one of the best way to leverage the tax benefit provided by the government. There are several tax benefits such as the ability to recover the cost of income-producing property through depreciation, road to earn benefit from personal residence exemption, deduction for mortgage interest and likewise.

Proud ownership: Buying a real estate would only be an investment but would also make you the owner of the property, thereby inducing a sense of pride in you. Being the owner of the property, you would not only have asset but also have a complete control over it, which you cannot have in case of investments like stocks and bonds.

It can be inherited: Real estate can be a good investment in terms of passing to the next generation. While a short term investment can assure you several benefits, a long term possession of the asset can also guarantee some financial support to your next generation as well.

Outlook 2017

Outlook 2017-the story will focus on where real estate sector are headed in 2017.

I feel that the year 2016 will be remembered as the year of key reforms in Real Estate Industry for India. It’s a landmark year as the Union Government passed GST, RERA, Benami Transaction (Prohibition) Amendment Act. To top it all, the move of demonetizing the higher currency laid full emphasis on eradicating the black money component from the market. With RERA ready to be implemented this year in all states, it will strengthen the association between a buyer and a developer. This will improve the buyer sentiments as the customer will gain trust in the market. This will help to propel the growth of organised real estate in India. Post RERA implementation, we will also come across many challenges that government would have to resolve with time to make the real estate industry more transparent and professional. There still is scope of improvement from the government by launching initiatives like single window clearance. This will smoothen the process for the developers and ensure timely delivery of their projects.

With a lot of transactions getting digital post demonetization, we will automatically observe a much transparent realty sector in 2017. This year I anticipate good sales to happen post the Budget and after RERA implementation in May. Customers will regain faith once the government announces its Budget and RBI announces its policy. The road ahead is visioned to be in the right direction and sales gradually picking up after the mid year. The real estate developments will shift towards tier 2 and tier 3 cities with the smart cities coming up. This will eventually widen the real estate growth outside the parameters of metros and capital cities. All these policies by the union government lead to a positive growth with interest rates going down and property prices heading towards realistic pricing after the price reductions. The end users who were sitting on the fence and waiting will be able to now take a decision and buy the property desired.

 It’s the right time for the realtors to focus on customer service and gain momentum in the market. Opportunities are going to be immense for realtors who are agile to grasp the changing processes and adapt to the professional style of working.

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