Hopes dashed; Present Budget Fails to Deliver

Given the industry scenario, there were naturally several expectations from the Budget. The provisions expected for the real estate and infrastructure sectors have remained on the wish-list rather than becoming reality in a diminishing market.

The Budget is not the only avenue for the FM to introduce the measures required to prop up demand in the housing sector. In that sense, we remain optimistic. But the expected measures came short even in the large and crucial affordable housing segment.

Key measures announced in the Budget:

• Focus on rural housing and housing for urban poor – measures include increased allocation for Jawaharlal Nehru National Urban Renewal Mission to Rs. 128.9   billion, enhanced allocation for housing and provision for basic amenities to the urban poor to Rs. 39.7 billion (includes Rajiv Awaas Yojana, a new scheme aimed to make the country slum-free in the five year period), allocation under Indira Awaas Yojana increased by 63% to Rs. 88 billion and further allocation of Rs. 20 billion for rural housing fund. If these are not merely populist announcements but a sustained and synchronized effort is made towards this urgent end, this government will establish itself as one that believes in and practices inclusive growth. Meanwhile, they should be more realistic in the definition of affordable housing and housing for poor where parameters of plot size, floor area and cost of construction are concerned. Tax savings and incentives for developers that are equipped to service this enormous segment should also be taken seriously as only collaborative effort will see this ambitious plan bear fruit.
• A key negative for developers is the increase in minimum alternate tax (MAT) to 15% from 10%. The increase in MAT affects developers with low taxes because of tax breaks for executing government projects.
• Tax exemptions for STPIs extended by a year, which can maintain occupancy levels for IT parks. But this could potentially also cannibalize demand for new SEZ developments in the near term.

On Thursday, the Centre asked States to come on board to formulate new schemes for housing the urban poor on an urgent basis. We hope this is done in a feasible manner. All in all, we will continue to keep our faith and hope that the urgent measures required will be recognized and addressed promptly by this government following the Budget announcements.