Is it wise to invest in Indian Real Estate Market in 2020-2021?

Finance Minister, Nirmala Sitharaman presented the Union Budget 2020-21 on 1st February. Here are the highlights of the budget for the real estate sector

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File photo
  • The deductions on affordable housing were allowed on housing loans sanctioned on or before 31st March, 2020. To ensure that more people avail this benefit and to further incentivise the affordable housing, the date of loan sanction has been proposed to be extended by 1 year and a tax holiday is being provided on the profits earned by developers of affordable housing project approved by 31st March, 2020 to boost the supply of affordable houses in the country
  • Currently in real estate transactions, while taxing income from capital gains, business profits and other sources if the consideration value is less than circle rate by more than 5%, the difference is counted as income both for the purchaser and seller. In order to minimize hardship in real estate transaction and provide relief to the sector, it has been proposed that the limit be increased from 5% to 10%
  • Rs 100 lac crore would be invested on infrastructure over the next 5 years across various sectors like housing, basic amenities, energy, healthcare, educational institutes, transportation, logistics and warehousing, irrigation projects, etc

According to CNBC.com, the year 2019 was a period of many highs and lows for the Indian real estate market. The ongoing NBFC crisis resulted in a liquidity squeeze and the slow pace of recovery in sales. However, on the positive end, the successful launch of India’s first Real Estate Investment Trust (REIT) opened new avenues for investments while multiple positive government initiatives provided a much needed relief to the sector. As per ANAROCK research, the housing sales value of India’s top 9 listed players touched a whopping Rs 108B in the 2nd and 3rd quarters of 2019, amounting to a 5% growth QoQ. Housing sales in 2019 saw a modest 4-5% annual growth with over 2.58 lac homes sold during the year. New housing launches in 2019 saw 18-20% annual growth and developers are hoping that sustained efforts of the central government like additional deduction on loan interest, GST rate cut, alternative investment fund for stalled projects and changes to credit guarantee scheme would strengthen the sector, especially affordable housing-led growth

In 2020, the government’s stressed asset fund is expected to play a key role in fulfilling last-mile funding for liquidity-hit stalled projects, according to an assessment by CARE Ratings. According to experts, residential growth in 2020 will mainly depend on the swift on-ground implementation of some of the previously-announced sops. If not, then buyer sentiments will be impacted negatively. Second half of 2020 will see the most traction for the real estate sector and only the financially stronger players will stay ahead in the game. It  is also expected that many large real estate companies will witness multiple IBC-led resolutions. Hopefully, with this buyer sentiment will improve and also revive demand of housing units in NCR and Mumbai-MMR

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