The Union budget that was presented by Finance Minister Nirmala Seetharaman has a significant impact on the real estate sector in India. The Indian real estate sector is poised to make a major contribution to the country’s GDP in the coming years. It is also a prime employment generator employing thousands of people and securing their livelihood. The policies framed by the budget will have a significant impact on the economy in general.
Key announcements
1. In this budget the housing needs of 1 crore urban and rural middle-class families will be addressed. The government has allocated Rs 10 Lakh crore to create 3 crore additional houses under the Pradhan Mantri Awas Yojna (PMAY). This is expected to increase the demand in the mid-segment and affordable housing segment encouraging developers to construct more projects catering to affordable ready to occupy flats in Kochi.
2. The government will help develop “plug and play” industrial parks in 100 cities to attract investment and encourage industrial growth. These parks will attract industries with ready-to-use facilities reducing their operational costs and time. The government intends to support regional development in strategic locations for increased economic benefit. All these initiatives are set to increase real estate activity in these locations to meet the housing and commercial demands.
3. One of the significant announcements of the budget was the withdrawal of indexation benefits on long-term capital gains. This means that the purchase of the property can no longer be adjusted for inflation while calculating taxes on after-sale income. The tax on the long-term capital gains has been reduced to 12.5 % from 20% but the removal of indexation benefits will increase the tax bills by a significant margin, especially for properties purchased many years ago. The returns on investment will be reduced for long-term property investors due to this move. This is expected to stabilize the property prices due to reduced speculative investments benefiting the first-time home buyer.
Another consequence of this policy will be the slowdown of the luxury real estate market like the 4 BHK flats in Kochi, while the urban rental markets will witness increased demand. Also, the affordable housing segment is expected to grow.
4. The budget has reduced stamp duty charges for women home buyers promoting inclusive home ownership. A progressive move that will motivate real estate developers to target women home buyers with specifications catering to their needs.
These are the key announcements and the impact they are expected to have on the real estate industry impacting builders and developers in Kochi.
