Union Budget 2019-20: JLL Reaction

Affordable housing, liquidity and infrastructure remain key focus of the government

Ramesh Nair, CEO & Country Head, JLL India

A)    Enhanced focus on affordable housing to achieve ‘Housing for All’ Mission

Union Budget 2019 has been presented on expected l ines. With sustained focus on affordable housing, government has emphasised on increasing the demand. In the past, the government has already awarded the infrastructure status to the affordable housing segment, increased the carpet area and re-defined income definitions to boost supply in the market. Government has already extended the 100% tax holiday under section 80-IBA of the Income Tax Act, 1961 to 31 March 2020.

With an objective to help buyers in the affordable and mid-housing segments, an additional exemption of Rs 1.5 lakh on interest paid on housing loan, over and above the existing Rs 2 lakh, has been provided for properties up to Rs 45 lakh. Considering that a majority of homebuyers fall in the lower and mid-income segments, this tax benefi t will boost demand substantially. This will significantly benefit first time home buyers who will enjoy the benefits of interest subvention under the CLSS scheme and the announced tax benefits. With effective interest coming down, it will increase the eligibility for the mid-income housing segments.

In a bid to improve supply, Budget 2019 has proposed to open up land parcels of government and PSUs to be utilised for affordable housing and public infrastructure.

B)    Rental housing market to get a fresh lease of life

Budget 2019 has proposed to bring in a Model Tenancy Law. This will be finalised and circulated to the states. Archaic rental laws in the country so far have proved disadvantageous for both, tenants and landlords. The new rental act will bri ng the required institutional framework in the country and make it more organised and fair for landlords and tenants.

C)    Stricter lending governance and disclosure norms

Non-Banking Financial Compan ies (NBFCs) and Housing Finance Companies (HFCs) play a crucial role in supporting the real estate sector. Unification of the regulatory body and to place both NBFCs and HFCs under the aegis of RBI will lead to better regulation of HFCs and improve transparency in the system.

D)    NBFC liquidity issue addressed

Budget has proposed a one-time provision for six month period to offer partial credit guarantee to public sector banks to buy high rated pooled assets worth Rs 1 lakh crore from NBFCs. This will provide the much needed liquidity to the NBFCs. They can thus liquidate their portfolio and meet their liabilities in a timely manner. Additionally, it will induce an atmosphere of confidence.

E)    Easing of local sourcing norms in single brand retail

Relaxation in the existing norm of 30% local sourcing for single brand retail has been one of the key demands from foreign investors keen on putting money in single brand retail in the country. Budget 2019 has proposed to ease this norm. This would make the segment more attractive for foreign players and investors.

F)    REIT in India gets another support

Budget has allowed foreign portfolio investors (FPIs) to subscribe to listed debt papers of REITs and InviTs. This will broaden the investment options for foreign investors and henceforth, spur higher flow of funds. FPI inve stments in REITs through debt papers will enable REIT players to increase the asset portfolio and make REIT investments more attractive.

G)    Emphasis on transit oriented development (TOD)

Budget has emphas ised on the development of TOD zones and their importance on the overall urban development. The TOD provision will lead to growth of commercial and industrial units along the new and existing corridors across the country.