Government plans to restructure the infrastructure – Jain heights

The Union Budget of 2017 has been promising so far, it continues the economic reforms, control inflation, and prudent fiscal management. Moreover, it provides little impetus in the short term for the real estate sector other than just a boost to the affordable housing segment.

The infrastructure status on affordable housing and tax relief for real estate developers are getting to see the positive steps, however, this is not going to help short term sales. The government has provided up to Rs 12,500 income tax benefit to individuals, this is insufficient to provide the demand side push to the sector.

So here are few Budget proposals that we like to bring to your notice that brings the influence and the realty sector going ahead – 

1) Infrastructure status to Affordable Housing, the boost for affordable residential sector

The impact of Union Budget 2017-18 has granted the much-demanded ‘Infrastructure’ status to the affordable housing. This decision is well aligned with the government agenda of ‘Housing for All by 2022’. Also, this will allow easier access to capital for developers, at a lower rate with a longer amortization period.  This eventually allows developers access to viability gap funding and the tax incentives. For the affordable housing purpose instead of the built up area of 30 and 60 sqm, and the carpet area of 30 and 60 sqm will be counted. This will, however, apply only in case of municipal limits of 4 metropolitan cities, while for the rest of the country including the peripheral areas of metros; the limit of 60 sqm will apply.

The time period for such projects has been extended from 3 to 5 years by the government. Most buyers of affordable housing got a boost with the announcement of interest subvention, 4% and 3% on loans up to INR0.9 million (USD13,318) and about INR1.2 million (USD17,758), respectively. The proposed deduction of the IT rate to 5% for taxpayers below the income level of INR0.5 million per annum (USD7,400 million) will increase the disposable income of the common man which will, otherwise, raise spending power and increase investment in the affordable segment.

2) 10 million homes to be built by 2019 for the homeless and those living in kutcha houses:

Home for all is the concept, making the basic needs of life come alive. To stimulate the rural housing sector in India, about INR230 billion has been allocated under the Gramin Pradhan Mantri Awas Yojana (GPMAY). This began in the motive of promoting affordable housing not only in cities but also in rural areas.

At present the housing sector is active mostly in Tier-I and Tier-II cities in India; so this scheme will not only provide necessary housing to the poor but also promote the residential sector in other rural areas.

3) Tax breather for notional rent income on unsold, unoccupied or completed projects

At present, most houses that are unoccupied after getting completion certificates are subjected to tax on notional rental income. Builders for whose constructed buildings are stock-in-trade, the rule will be applicable only after one year of receiving the completion certificate from the government. The law will provide some breathing time for developers to liquidate their inventory; this indeed takes the pressure off their shoulders.

4) The National Housing Bank (NHB) will refinance individual housing loans of about INR200 billion (USD3 billion) in 2017-18

The demonetization drive almost coming to an end that started in 2016 has resulted in surplus cash within the banks; allowing major banks across the country to lower their lending rates.

The decrease in lending rate will be welcomed by not only new homebuyers but also will be a reason to rejoice for homebuyers who have already taken a flexible housing loan. This refinancing scheme from the NHB will improve the sentiment of current homeowners, for those subjected to high lending rates in the past.

5) Foreign Investment Promotion Board (FIPB) is under abolition

Lately, in the last two years, the government has implemented many reforms to encourage Foreign Direct Investment (FDI) in India.  In fact, more than 90% of the total FDI inflows currently take place through an automatic route; hence the government has decided to do away with the FIPB in 2017-18.

This is in conjunction with the government’s understanding to further liberalize the FDI norms and attract foreign investors. Under this automatic route for FDI, all foreign investors will not require any prior approval from the FIPB and will only be subject to laws defined for each sector accordingly.

So the bottom line, it was indeed a positive budget for the sector and the government has done great to create awareness for the need to increase tax compliance. However, demonetization was a temporary strike at the economy and it may bounce back anytime sooner.

It’s a good time to settle down!

We are witnessing the verbal slugfest among the government and the Opposition as well as the woes of the common man who has been a victim of hardship ever since the Modi government scrapped the higher denominations of the currency notes (Rs 500 and Rs 1,000).

Here, the banks are poised to reap the benefits in many ways. Compared to other gains, lenders are set to see their CASA(current account and savings account) ratio improve substantially with minimal effort giving them enough room to make borrowing cheaper.

Lately, nothing has changed here. As far as the interest of people to buy homes or to locate a property still continues to be very good enough. But of course, it’s a wait and watch period for the time being.

You must always know that whenever there is a talk about property prices or interest rates coming down, every buyer waits. We don't think property prices are going to crash, but having said that, most of the loans today are on a variable rate basis depending upon the lenders. So, even if the rates do come down after a couple months, the customers still get the benefit of it.

So, we assume it is a short-term phenomenon. Our need, our requirement, our (housing) shortage is inclined very much that people will not wait more than 3-4 months before they start rushing back to it.

As the RBI cuts interest rates, and if you are looking to settle at a permanent residence to live in for a longer time, then there is no time better than today. Seeing the population of our country and the rate at which urbanization is happening if you were going to be a real user of the property, then you should never ever put back your decision by years. As far as the situation speaks, we are convinced that the middle income and the lower income India has a long way to go, the sooner you buy the property the sooner you save your rent for the better.

Visit www.jainheights.com for more insights on guiding you how and when to buy our properties.

The real estate regrets with cash chaos in India – Jain Heights

Being one of the boldest movements by the Government of India that was announced in just a 40-minute speech, the demonetization of 500 & 1000 rupee notes has rattled the economy in all possible ways. This decision has however received mixed reactions from everyone. The real estate sector is one of the highly affected by the Prime Minister's move to ban currency notes of 500 and 1000 overnight. And this move has elicited a pretty mixed response from people within the sector.

The actual driving force behind this historical decision was to eradicate all the black money. Recent studies pegged India’s black market economy estimate at over 30 lakh crore that is almost about 20 percent of total GDP. This is comparatively bigger than the GDP of countries like Sweden and Argentina.

Adding to this heated situation, the industry experts and veterans said the move will hopefully increase transparency in this segment and promote bank involvement in a much dependent way. 

Many builders and resale property marketers can be adversely impacted following the government’s decision; also the experts mentioned housing prices could witness downward pressure, helping revive demand in the sluggish housing segment altogether.

Reports from the Catch news said, a broker from the capital had to confess that “They will find a way to route transactions through other ways, without specifying how. There will also be a minor inconvenience for a short period of time, but it shouldn’t be of any major impact to the business.” This, however, is an agreed statement by other real estate agents as well; they altogether seem all solid not being much worried about the government ban on currency. 

But the experts had a different opinion altogether, The banning of higher currency notes is a major move that will help curb unaccounted-for cash in the real estate sector. Well, we have just witnessed a tremendous step towards increased transparency in the Indian real estate industry finally. The effects will be far-reaching and immediate, and will for sure shake up the sector. The top analysts said primary markets, which comprises of new flats and residential colonies, will not see much of an impact, as most of their transactions are through mortgage and bank-routed transactions.However, primary markets will not be affected. But secondary markets could see a change indeed. It can help improve transparency on a larger scale, with a severe impact on plotted developments. 

The bottom line of this move will definitely lead to making the sector more transparent and the country free of corruption and finally a better tomorrow.

Stay tuned with us on Jain Heights for more interesting articles.