The government acknowledges the importance of the real estate sector and its contribution to the GDP of the country. To kick-start the economy, it has initiated various steps to safeguard homebuyers’ interests and revive the sector. So far, most of these steps are aimed at comforting the supply pressure to support the government objective of ‘Housing for All by 2022′.
The sector expected that the Budget 2020 will bring new tax policies and reforms that will increase the sales of residential units. It has extended the additional Rs 1.5 lakh tax benefit on interest paid on affordable housing loans, which is a relief to homebuyers. Extension of tax holiday under 80IBA till March 31, 2021, is good news for projects under the affordable housing category. New tax slabs too might help the sector to increase the demand. Also, in the Maharashtra State budget announced earlier this month, the government has slashed the stamp duty charges by 1%. This is expected to help the sales of residential properties of the state.
According to Anarock Property Consultants, housing sales rose by 22% per cent to 80,870 units in 2019 across the Mumbai Metropolitan Region compared to 66,440 units in the previous year. Still, improvement in the demand side is necessary. Commercial spaces topped the list in terms of sales. Commercial or office real estate boomed in 2019 and is likely to stay in demand in 2020 as well. The supply of office spaces is steadily increasing. When it comes to residential properties, some areas of Mumbai have tracked homebuyers’ interests such as Wadala.
Wadala has good connectivity in both south and north directions, as well as some well-known locations, which are in proximity. Also, the Neral-Karjat area is ranking homebuyers list since it has good affordable homes with all the amenities and it is enhanced with lush greenery, good greenfield development and good quality of life. The prices of the apartments have steadily increased over the year. Even for Wadala, the prices have risen to Rs 40,000 per sq.ft. This prominent location is in the heart of Mumbai and has tracked the most number of inquiries during various real estate expos. Hence, one can foresee that there is still some hope left for the residential sector. Some of the major issues that the sector is facing are lowered demand, liquidity problem – for which, the government has introduced new tax slabs. This will increase the purchasing power and bring back the confidence of the homebuyer in the sector.
Also, one of the problems that the sector is facing is the unsold inventory of residential units; specifically under-construction projects. The number of incomplete projects is large, due to which many home buyers are still waiting for the project to complete and get possession of the property. The government has taken one of the biggest steps to resolve this issue, even before the announcement of the Union Budget 2020, which is the announcement of Rs 25,000-crore distress fund. This initiative will help developers complete unfinished residential real estate projects. The government should also come out with policy reforms on rental housing. The higher rental allowances will help people to get tax benefits, and will encourage them to go for rental units. Co-living is also one such concept that is gaining popularity because of the higher rent demands.
According to the definition of affordable houses, homes under Rs 45 lakh come in this segment. But many top metro tier-I cities and tier-II cities cannot avail the GST benefits since the price of homes does not come in the aforementioned price range given by the government. Hence, the sector would like it if the government could relook the price range for affordable housing while keeping the area aspect the same. At times, the affordability of homes in urban areas after considering the additional transaction costs such as tax, stamp duty, and registration charges, etc. makes it an expensive deal. Hence, the sector expects that lowered stamp duty charges will also bring a positive impact on the sector.
With all these reforms, the sector’s cash crunch issue will be resolved, and some of the homebuyers’ burden would be taken off. These steps, if implemented correctly, would improve the situation of the sector and consecutively help in increasing residential sales.