Budget 2018: Housing for all Scheme

In the previous year, the real estate sector went through a series of massive reforms, each intended to enforce better regulations in the industry. First, the RERA Bill was introduced, which ensured transparency in the real estate sector, with developers made to disclose the timelines of the building process. The GST bill in real estate was another massive change, aimed to reform the tax structure by making it more uniform. But none of these changes were as impactful as the Government’s Housing for All scheme, intended to make housing accessible for all Indians, regardless of their personal income. The Budget 2018 was expected to take this agenda even further, boosting the affordable housing segment and setting in place processes to remove the financial obstacles to home ownership. But has it succeeded in doing so?

 

Budget Expectations vs Reality
Many financial analysts speculated that the budget would ensure a uniform stamp duty of 3 percent, introduce concessional rates of GST on residential projects and lower the registration fees of new homes. They also expected a revamp of the income tax slabs, which would increase the spending power of individuals, making it easier for them to invest in real estate. While none of these expectations were echoed in the actual budget, the Housing for All Scheme did receive a big push by the Finance Minister.

The Pradhan Mantri Awas Yojana announced by the government has aimed to construct 10 million homes by 2022, so every citizen of the country has access to good housing. Of these 10 million homes, 95% of them are set aside exclusively for the Economically Weaker Sections (EWS) and Lower Income Groups (LIG). The budget 2018 provided further support to this agenda by setting up a separate Affordable Housing Fund under the National Housing Bank. This will make it easier for individuals to secure loans and invest in a home.

 

Changes in National Housing Bank and Circle Rate
In order to channel resources towards the Affordable Housing Fund, the budget announced that bonds authorised by the Government of India and priority sector lending shortfall would be utilised for this purpose. While the National Housing Bank  Act of 1987 allowed for equity to be held with the Reserve Bank of India, it will now switch hands to the Government of India. The Affordable Housing Fund will likely smoothen out the process of acquiring funds required for the EWS and LIG groups to buy real estate.

The budget 2018 for housing has also provided some relief to real estate investors by ensuring that no additional tax will be levied if the difference between the final selling price of the property and the stamp duty value is less than 5 per cent. Previously, if the real estate market was down and a property was sold at a price lower than the fixed circle rate, the difference in the amount would be taxable against the individual’s income. The newly-introduced regulations will safeguard the interests of real estate investors even when there are market fluctuations.

 

Impact of the Budget on PMAY Scheme
The Pradhan Mantri Awas Yojana was a landmark initiative by the government to make affordable housing a reality for all income groups, especially the LIG and EWS groups. Under the PMAY scheme, the Credit-Linked Subsidy Scheme also introduced major reforms by redefining the income groups and providing special subsidies on interest payable as well as helping individuals save taxes on a housing loan. CLSS also gave preference to women, encouraging more women to become property owners. The budget provided a huge reinforcement to the PMAY and CLSS, by channelling even more funds to them.

From both a developer and buyer’s perspective, the budget’s support of the Housing for All scheme comes as a huge benefit. For prospective real estate buyers, good quality affordable housing options are right within their reach. For real estate developers, it makes it easier to sell affordable homes and gives them the impetus to further expand upon the affordable housing segment.

Overall, while the Budget 2018 for housing did not include some of the expected changes, it has reinforced the government’s support of the Housing for All initiative. With the positive reforms introduced in the real estate sector, the best time to invest in a home is now. If you are planning to buy a home in 2018, make sure you visit Brigade for luxurious homes in the top residential localities of Bangalore, Mysore and other bustling cities, which are also the best real estate investment options for NRIs.