The Union Budget for the year 2019 was announced, on the 5th of July, by Finance Minister Nirmala Sitharaman. Prepared for the entire fiscal year, the Budget included a detailed structure of income and expenses from the previous year, along with an announcement of future methods of raising funds from taxes. These funds have been assigned for bettering welfare measures in a wide range of segments. With the aim of becoming a USD five trillion economy by the year 2020, this year’s Union Budget includes provisions for focussing on the development of heavy investment in infrastructure, digital economy, and job creation. It also included several key reforms that will impact the real estate sector of the country.
Some of the key highlights of the Union Budget, with regards to the real estate sector, include the following:
Focus on Affordable Housing:
The Finance Minister announced the Government’s dedication to the Affordable Housing initiative by way of using joint development and concessions to boost the said initiative. This shall be done by using several parcels held by the Central Government and public sector enterprises to build public infrastructure and affordable housing properties. Under the ‘House for All by 2022’ mission, the Government aims to oversee the construction of 1.95 crore houses under the Pradhan Mantri Awaas Yojna (PMAY) scheme.
Reformation of rental laws:
In a move to effectively establish and boost the highly unorganised Indian rental market, the Government has announced a new model tenancy law along with several other reform measures. According to the Finance Minister, the current rental laws in the country are archaic, and do not address the relationship between the leaser and the tenant, realistically or fairly. The new tenancy model will be finalised and circulated soon, which should be able to balance the rights and responsibilities of both landlords and tenants, thereby increasing efficiency, and benefitting the USD twenty billion Indian rental market, as per reports generated by the IMF.
Resolution of NBFC crisis:
The Government has also announced its intentions to lend a helping hand to India’s Non-Banking Finance Companies (NBFC) to ease the ongoing liquidity crisis. In an effort to enhance the liquidity access for the sector, the government aims to provide a one-time, six-month partial credit of INR one lakh crore to Public Sector Banks for purchasing high-rated assets of financially stable NBFCs. This move is touted to cover their first loss, of up to ten per cent. The Finance Minister has also proposed allowing FPI’s (Foreign Portfolio Investors) and FII’s (Foreign Institutional Investors) to participate in the same.
Regulation of the Housing Finance Sector:
The Indian housing sector has long been unorganised and problematic. In a move to add stability to the sector, the Union Budget announced that The Reserve Bank of India will now be in charge of the regulation of Housing Finance Companies (HFC). This power was previously managed by the National Housing Bank (NHB), but for the efficient and conducive regulation of the housing sector, the RBI shall now be in charge. This should help in quality assessment by the lender, for fear of facing scrutiny by RBI, if found indulging in improper practices.
The regulations and changes put forth by the Union Budget are expected to have a great, positive impact on the real estate sector. Focus has been placed on several areas of concern with measures for swift resolution. Implementation of the same is touted to bring welcome changes to the way the sector functions and help streamline a number of processes.