Home improvement plan

For the ailing real-estate sector, the Budget has doled out a whole lot of goodies, adding to the umpteen measures undertaken in recent years. In the Budget, the Centre has extended the benefits under Section 80 IBA. Under this, earlier, the developer could claim 100 per cent of the profits as deduction, if the affordable housing projects were approved on or before March 31, 2019. This has now been extended to approved projects up to March 2020, thus incentivising more developers to enter this segment. Realty players may launch more projects in the affordable segment in the near future.

Yet another breather for developers has been the tax exemption (on notional rent of the property) given for two years for unsold properties. Previously, on the units that were unsold, there was tax exemption for only one year.

Also, when an individual sells one residential property and buys another, he is eligible for exemption under Section 54. The tax benefit has been widened by allowing the assessee to claim deduction on purchase of two residential properties — up to capital gains of ₹2 crore.

This should also boost demand and augur well for realty players.

Signs of recovery

Inflated prices, speculative activity and lack of transparency have long plagued the real-estate sector. The residential space has been in the doldrums, and the broad economic slowdown has impacted the demand for properties.

To address some of the structural issues, the Centre brought in the much needed reforms and policy changes, with the intent of ushering in more transparency and empowering home buyers. Key reforms include GST (Goods and Service Tax), RERA (Real Estate Regulation and Development Act), and amendment to black money Bill. A lot of effort has also gone into making REITs (Real Estate Investment Trusts — that pools investors’ money to invest in a collection of real-estate assets) more viable, financially.

Though these initiatives dampened demand in the near term, some signs of recovery have been visibly since early 2018. New project launches have increased, while unsold inventories have declined. Prices have stagnated in many cities, in turn improving the affordability and shoring up buyers’ confidence in the market.

Realty companies with presence in middle and lower-income housing segment have seen a ramp up in volumes. The Centre providing 100 per cent deduction in profits for affordable housing construction has also led to more participation of builders in the space. Commercial real estate has also seen steady traction. In fact, the current shortage in this segment is working to its favour.

New-found opportunity

With incentives from the government, developers have been able to realign themselves to tap the opportunity in affordable housing.

For instance, Sunteck Realty has been mostly into premium residential housing, but has forayed into affordable housing projects. In the affordable housing segment, Brigade Enterprises has launched about 40 per cent of the projects in FY19. The trend is likely to continue with developers launching more projects in this space.

COMMENT NOW