Great on Infrastructure! Not so good Housing!

Great on Infrastructure! Not so good Housing!
Mar 2016 , by , in ARTICLE

The fact that Union Budget 2016 has been big on infrastructure is indeed a welcome news and the announcement of investments of up to Rs 97,000 crore for road construction was much required at this hour. In fact the whole total outlay for infrastructure that stands at Rs. 221,246 crore was the need of the hour for the country in transition.

But at the same time the Budget 2016 has not been as bold when it comes to addressing the needs of the housing sector, especially with no major announcements made to revive an already sluggish Real Estate Market.

The two low hanging fruits that have been missed out on, but could have made a difference without putting burden on the budgetary allocation were the provisions of Single Window Clearance for Real Estate Projects to bring in more transparency and the Industry Status to Real Estate Sector to avail legal low cost funding were completely ignore. Both these initiatives would’ve not only been a great booster, but also a step forward in government’s “Ease of Business” initiative, of keeping less government and more governance.

On the bright side although the Government has announced the interest rebate of Rs 50,000 for first time home loans if the value of homes does not exceed Rs 50 lakhs but in a city like Mumbai and Delhi, the average house cost a lot more than Rs 50 lakhs, hence an extremely small segment of first time home buyers will be able to benefit from this initiative. In the National Capital Region thought the neighbouring areas of Greater Noida, Kundli, Yamuna Expressway and Sohna will have the ticket price starting Rs 50lakhs, but finding the same in capital Delhi is next impossible.

Similar is the case with Service Tax exemption on housing construction of houses less that 60 sq ms in the cities, keeping in mind that most of the urban population load is in the big metros of the country, this restriction on size limit again fails to address the aspiration of millions of middle class first time buyers.

Also the proposed 100% deduction for profits of undertakings from housing projects during June 2016 – March 2019 is a bit impractical, since the stipulated timeline of 3 years is impossible to implement on practical terms, and realistically speaking it takes at least 5 years for a housing project to be ready and delivered to consumers.

But at the same time while these micro analysis may not a pose such a great picture, Real Estate is one sector that is hugely dependent the overall health and sentiment of the economy, and hence the impetus of overall infrastructure of the nation, along with the rural and agriculture sector is bound to bring in the trickledown effect in the economy and boost the overall economic sentiment of the nation.

Also more roads lay on the National and State Highways, more are the opportunities for new Real Estate projects, both of housing and commercial purposes, case in point is that just the confirmation announcement of widening NH-24 into an eight lane project has brought life to projects in the surrounding area.

Lastly the big infrastructure projects always bring in huge economic multiplier effect for the whole country, both in terms of employment generation and for the ancillary industries related to infrastructure sector and from cement to steel to most of the ancillary industries are bound to see “ache din”.

To round it off, it will be fair to say the Union Budget 2016 while being Great on Infrastructure, is not so Good for Housing and Real Estate, but that not a really a bad news.

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