Home Buyers | No Real Gains

In addition to the incentives the government has announced to stoke consumption (read: spending), it will hope that its sops for borrowing will enthuse reluctant home buyers. However, its plan to woo said home buyers (and win their votes) may not materialise. Home purchases fell to a seven-year low in 2017, despite sliding prices. The introduction of GST and the implementation of the Real Estate Regulatory Act (RERA) hurt a sector already reeling from the aftershocks of demonetisation in late 2016. New project launches fell by 41 per cent and sales of new homes by 7 per cent in 2017. As many as 440,000 housing units were unsold in seven major cities at the end of 2017, with Delhi-NCR contributing the maximum at over 150,000 flats, said property consultant JLL India in March 2018.

One of the remedial measures in the budget is to exempt gains made on home sales from long-term capital gains tax. This was applicable earlier too, but only if proceeds were used to buy a single new residential property (under Section 54). Now the benefit of rolling over capital gains has been extended to two homes, for up to Rs 2 crore. However, even this will not help much, say experts. The clause will be [some kind of ]motivation for people, but it won’t give a huge boost to the market, says Gulam Zia, executive director with property consultant Knight Frank India.

Investors have already fled the market. And there is no assurance that an investor will even book profit in today’s market, where demand is lagging. It is also hard to expect those earning less than Rs 5 lakh, who will now enjoy a tax rebate, to turn into home buyers.

The government has also extended some relief to realty developers, taking into consideration the challenge of excess inventory. It has increased the exemption period for notional tax on unoccupied units from the existing one year to two years. This is expected to give developers relief, allowing them to concentrate on sales strategies. To further boost affordable housing, the government has extended the benefits under Section 80 (IBA) till March 31, 2020. However, there is already a question mark on the offtake in affordable housing schemes and the data put out so far. Experts say the definition of affordable housing and actual offtake numbers on the ground are not convincing.

Shanti Dhariwal, Rajasthan minister for urban development and housing, says the budget will have little impact on real estate because those investing in a second or more homes are not concerned about the nominal tax they pay. I would have preferred amendments in RERA’s stringent clauses to remove the negativity it has caused, he adds. D.S. Prasad, director, Aparna Constructions, Hyderabad, agrees. If GST was made five per cent for the sector and some concessions announced for petroleum products, the realty sector may have got a boost, he says.


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