Budget 2020: This would fuel the real estate growth story in 2020
HFCs are an important player in the financial system because of their role in providing access to Housing finance to various sections of the society.
Budget 2020 India: HFCs are an important player in the financial system because of their role in providing access to Housing finance to various sections of the society. We look forward to the upcoming budget to help create more avenues for accelerated growth and sustainability of Housing Finance Industry. We hope the upcoming budget helps us in the following way: Enable HFCs to diversify the borrowing profile: Allow HFCs/ NBFCs which are well capitalized, with a good track record, strong ratings, reputed parentage to access public deposits. This will significantly reduce risk by enabling access to large and long term stable funding sources, thereby improving diversity in the borrowing portfolio of the lender.
Fuel growth through tax rebates: An increase in the tax rebate for housing loan interest is the need of the hour. A hike from the existing Rs 2,00,000 will encourage more salaried / small entrepreneurs to invest in a house thus helping in build in demand for homes. Similarly, the last personal tax relief in the form of deduction under section 80 C was in 2014, this much-needed increase will also uplift the sentiment of the consumers towards buying their own home.
Include ITC benefit in GST for under-construction homes — While the GST rate on under-construction properties was reduced to 5 per cent in 2019, the previous ITC benefit was shelved. Providing ITC benefits to developers is a great incentive to reduce property prices and thus, make under-construction homes attractive again. This will in turn revive demand for housing sector.
Revive projects: There are several real estate projects that are either delayed or just stalled. Timely intervention towards last mile funding or for reviving projects with cash flow mismatches will kickstart the sector. We hope the Budget helps by offering structured financial solutions to get these projects up and running. This will help in energizing velocity of the business cycle. Real estate is a significant contributor to the economy (contributes roughly 8 % to the GDP) and growth in this sector will lead to more job creation and allied industries such as steel and cement can also benefit.
HFCs/NBFCs notified under SARFAEI should also be notified under DRT: This will enable HFCs/NBFCs to recover losses on sale amount or on file action in DRT pertaining to cases where security is either under dispute or are incomplete.
To its credit, the government in the past has been prudent and honest in sticking to fiscal consolidation, even as it valued sustained growth, foreign investment and higher credit rating. When the economic growth came down below 5 per cent, it was ready to loosen the purse strings to fuel consumption — still well within the limit permitted under the FRBM Act — by allowing the fiscal deficit to clock 3.8 per cent for FY20 (versus the targeted 3.3 per cent).
It now promises to return to a more manageable deficit level of 3.5 per cent for FY21, which should please stakeholders across the board.
Through higher agriculture and rural allocation, as well as by leaving more in the hands of the middle class through tax cuts, the Finance Minister has effectively moved to revive the consumption demand that can inspire a virtuous cycle of recovery first and growth later.
Since consumption is also a sum of favorable prices, higher disposable income and consumer confidence, projects announced to improve rural employment and higher agriculture income come as a logical corollary. In fact, tax rate cuts for the middle class will have a greater impact once the Indian banks start passing on the interest rate cut benefits to them.
A substantial ₹90,000 crore would come from sale of government stake in public sector banks (such as IDBI) and financial institutions (LIC), adding to the ₹1.20 lakh crore estimated to be mopped up from CPSE stake sales (like BPCL and Container Corporation) in 2020-21. While the government has laid out an ambitious target of ₹2.1 lakh crore through disinvestment, it has also spelt out its vision to achieve this target, which is encouraging. The biggest signal from the Budget is the government’s willingness to step out of the fiscal constraints in favour of growth and stability. This is the need of the hour and the government has responded to that admirably. To check more Business News in India
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