Budget 2017 and its impact on real estate sector

The 4th Budget of the Union government was presented before the Parliament on the 2nd of February 2017. With much of the buzz that is circulating around the budget there has been a closer view by the experts and the normal people in the real estate sector.

The real estate sector received a mixed response from the Union budget of 2017. This was the 1st budget that happened after the demonetization of November 8th. After the process of demonetization the real estate sector was in a dull mood. There has been a reverse trend in the real estate sector after the demonetization.

Real estate sector have received several goodies in the Union budget of 2017. One of the major implications in the budget is the tax period for capital gains. It has been reduced from 3 years to 2 years which will have a positive result in the economy. This will result in the reduction of tax of the people who are selling their immovable property after 2 years and it will lead to the investment in the real estate sector. This will have a major impact on the metropolitan cities. Cities like Bangalore that boasts of a big IT market in India will be one that will receive favorable benefits. Tendency among the people to invest in the villa projects in Bangalore will increase. With decreased tax burden, people who buy flats and luxury villas in Bangalore for investment purpose will also increase.

The budget also changed the base year to which acquisition cost of an immovable asset is indexed in which the base year has been changed from 1981 to 2001. This will also make a momentum in the real estate sector and also help in gaining mobility of assets.

Budget 2017 has proposed infrastructure status for affordable housing. This is also a very good sign as far as the housing industry is concerned. One of the major drawbacks that our metro cities face from other world-class cities is that the increasing amount of slums in our metros. The affordable housing projects will make an end to these cultures especially in Bangalore that will give a boost to human development in the city. The slums can be converted into affordable flats and 1-BHK houses.

Another major relief in the housing sector is that the government has changed the time period for calculation of notional rental on unsold stock held by developers for tax purposes. In the earlier times the unsold flats which have received completion certification were subjected to tax but now they get a breathing period of 1 year. This will bring relief to the ongoing real estate projects and the completed ones in Bangalore. Many builders are facing the crisis where they need to pay towards national rental income after the completion of the project even if the flat is not occupied by any of the persons. This will also change the trend of unsold stock in the cities due to cash problem.

The budget of 2017 will have major implications in the market as far as the current market situations are concerned. The metros like Bangalore will have a boost for sure. The real estate sector totally in the country was in a slower pace in the year of 2016 and demonetization deepened its crisis further. The monthly sales and launches in the metros dropped drastically up to 50% in the period of demonetization. But the present budget seems to have a positive impact and it might slowly resolve some problems that the real estate industry is facing today.

The budget has a positive impact to the real estate sector in Bangalore too along with the other metro cities. There are several points in the budget that could give real estate a boom. Another beauty is that the budget considers people from all classes of the society and provides incentives for all from affordable housing to luxury house owners.



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