The Union government plans to launch a housing scheme for middle class families, Finance Minister Nirmala Sitharaman announced on Thursday, while presenting the Interim Budget in Parliament. Plans to expand the rural housing scheme, too, was announced. Both moves received a thumb-up from the real estate community. However, no change in tax rates or incentives for housing loans, at a time home prices have gone up in major markets, has left some disappointed.
One major announcement in the Budget pertaining to the real estate industry was housing scheme for the middle class.
"Our government will launch a scheme to help deserving sections of the middle class living in rented houses, or slums, or chawls and unauthorised colonies to buy or build their own houses," Sitharaman said.
She said that the government was close to achieving the target of 3 crore houses under the PM Awas Yojana (Grameen) and two crore more houses would be taken up in the next five years to meet the requirement arising from increase in the number of families.
Over the last one year, while real estate sales have surged in major markets, it is the mid and premium end of the market that is seeing strong traction, while the affordable housing sales have lagged. In this backdrop, there was some expectation that there would be some sops there.
The proposed launch of an housing scheme for middle class would boost demand for affordable housing units, and augurs well, said A.M. Karthik, senior vice-president and co-group head, financial sector ratings at ICRA.
"This initiative seems to be aimed at addressing the housing needs of those living in substandard conditions like slums and chawls or those burdened by rent. By facilitating home ownership, the government is not only looking to improve living standards, but also to stimulate the real estate sector and associated industries," said Sandeep Runwal, president, National Real Estate Development Council, Maharashtra.
If there are some tax incentives or urban land allotment scheme, companies could build affordable housing in the urban areas, which would help the lower middle class get housing inside the city instead of travelling very far outside the city limits, said Nesra B.S., chairman of Concorde.
But, at the same time, no mention of anything around PM Awas Yojana (Urban) or any additional tax incentives on home loans left some industry experts unhappy. The finance minister also didn't announce any changes to direct or indirect taxes.
"Boosting allocations for schemes like PMAY (Urban) to improve affordability and encourage new projects in this segment was a key expectation. No major announcements appeared in the interim budget regarding this. Tax incentives for homebuyers, such as increasing the deduction limit on home loan interest under Section 24, were expected. The interim budget remained silent on this as well," noted Anuj Puri, chairman of realty consultants Anarock Group.
The increase in capital expenditure outlay by 11.1 per cent to Rs 11.11 lakh crore, which is 3.4 per cent of the GDP, too, was welcomed by developers.
"The strong 11.1 per cent increase in infrastructure outlay signals a steady and significant wave of upcoming developments and opening of vast opportunities for all stakeholders, including real estate," said Badal Yagnik, CEO of Colliers India.