While the realty sector got considerable mention in the Budget, what the Finance Minister left unspoken has quite a few implications for the sector.

Two key demands that were unmet were measures to improve liquidity for builders and steps to boost the demand for homes. The low-key announcements for housing spooked real estate sector stocks and the realty index fell 2.8 per cent on Budget day and 3.9 per cent the day after.

Tax expectation

The sector’s expectation was that the home loan interest deduction limit would be increased from Rs 1.5 lakh, a figure that was set way back in 1999, to a higher number that is in pace with inflation.

This move would have helped provide longer-term tax visibility and benefits to home buyers in both the rural and metro areas. The Budget measure of a one-time additional interest deduction (Rs 1 lakh), only for first-time home buyers, may, in this backdrop, have but a limited impact on housing demand.

It may help increase demand for sub-Rs 40 lakh houses but may shut out buyers who already own a home.

Or even buyers from metro regions where housing prices are high.

With many realty companies grappling with high debt and problems with debt servicing, funding holds the key to better prospects.

But mum was the word on requests to increase liquidity — by easing FDI funding restrictions and creation of REITs. The real estate sector has high cash-flow mismatches and high leveraged builders have been forced to delay projects or sell off assets to fund construction.

Clarity on funding

Project delays have created other issues such as a further increase in cost and cancellations. More clarity on easing the funding situation would have helped developers.

The commercial real estate market was expecting tax benefits for the development of Special Economic Zones and sops to rekindle interest in SEZs. But the Budget left this unaddressed too.

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