Budget 2018: Wishlist remains a ‘real’ dream

Another budget eludes realty sector’s wishlist/ Sustained focus on affordable housing, a welcome move India’s real estate sector perhaps experienced one of its most arduous runs.

Published: 02nd February 2018 02:19 AM  |   Last Updated: 02nd February 2018 07:06 AM   |  A+A-

PM Awas Yojana, housing, home, scheme, graphic

Image for representational purpose only.

Express News Service

Another budget eludes realty sector’s wishlist/ Sustained focus on affordable housing, a welcome move India’s real estate sector perhaps experienced one of its most arduous runs over the past 18-odd months.

Facing contiguous turbulence from a slew of reforms, the industry has been akin to aviators rediscovering control in the event of a wobbly take-off.

The narrative for the upcoming financial year has only a handful of cheers for the real estate sector.
In 2017, measures surrounding ‘Affordable Housing’ were the mainstay for the real estate industry. This was also evident in the Credit Linked Subsidy Scheme (CLSS) and the last Goods & Services Tax (GST) Council meet when the effective rate was brought down to 8 per cent from 12 per cent.

A similar trend is visible in this budget where the ‘Affordable housing’ fund under National Housing Bank (NHB) has been created as a part of the priority sector lending.  

However, the budget has been silent on stimulating mainstream real estate demand. The sector has been bereft of any meaningful intervention that could have been achieved through the budget. More relief from GST was one of the major expectations the industry was looking forward to.
The single-tax regime ushered in additional cost pressure on real estate. Presently the sector falls under 18 per cent tax bracket of the GST Act with 1/3rd abatement for land.

However in major metros, the share of land is more than 50 per cent of the project cost. An industry status has been long overdue for the real estate sector.

Real estate is one of the major contributors to the economy. Growth in real estate has a multiplier effect on the economy. Despite this, the government has yet again failed to recognise the sector as an industry. The move would empower developers to raise funds at lower rates which would eventually whip up demand in the sector.

Another critical aspect that needed the government’s attention was Real Estate Investment Trusts (REITs). Despite the regulatory approval being in place for quite some time, REITs have been held back. REITs have the potential to enhance the supply of commercial real estate – an enabler for the employment ecosystem.

For unitholders, the long-term capital gains holding period for REIT units should have been brought down from three years to one year (at par with equity investments). However, we have missed out on yet another opportunity to infuse energy into the real estate sector.


3.7 million houses will be built in urban areas in 2018-19 and 5.1 million in rural areas.

For FY18, the deficit will be 30 bps higher and will settle at 3.5 per cent of GDP (as against 3.2 per cent), while for FY19 the target is set at 3.3 per cent.

Defence pensions has for the first time crossed the Rs 100,000 crore mark.

A dedicated Affordable Housing Fund (AHF) in National Housing Bank will be set up. It will be funded from priority sector lending shortfall and fully serviced bonds authorized by the Centre.

Shishir Baijal

Chairman & Managing Director, Knight Frank India

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