The real estate sector held significant expectations from the Union Budget 2018, hoping for alleviating measures post a testing period of reforms… Expectations regarding the budget ran high with the general elections just around the corner in a year’s time and elections due in eight states later this year. Prime Minister Narendra Modi’s efforts since being elected four years ago to mend the somewhat inconsistent public finances and develop new areas of growth have been largely welcomed by the markets. However, it has been a patchy road and the industry conjectured on how PM Modi’s government would work to contain the fiscal deficit, while also increasing spending in key areas of the economy in order to keep investors’ confidence.
On February 1, The Finance Minister Arun Jaitley opened the 2018 Union Budget speech with heartening facts, noting that India is today a 2.5 trillion-dollar economy – the 7th largest in the world, and soon projected to be the 5th largest. It is already the 3rd largest on purchasing power parity. The Finance Minister exuded confidence that the economy was on the path of achieving over 8% growth rate, the 6.3% growth clocked in the second quarter having signalled the turnaround in economy, with the growth in the second half of this fiscal (October-March) expected to accelerate to between 7.2% and 7.5%. The Finance Minister also said that manufacturing is back on the growth path and recapitalised state banks will also be able to support growth.
The following are the top 5 highlights of the budget:
Agricultural And Rural Economy Gets A Shot In The Arm
The budget chose to focus on strengthening agricultural and rural economy. The government emphasized on generating higher incomes for farmers, by helping them produce more with lesser cost, and in turn, earn higher income for their produce. The government decided to keep the minimum support price on all kharif crops at 1.5 times the production cost with the aim of doubling farmer income by 2022. Moreover, an agricultural market and infra fund with a corpus of INR 2000 Crore will be set up to strengthen the market connectivity. Additionally, INR 10,000 crore each is to be set aside for Fisheries and Aquaculture Development Fund as well as for Animal Husbandry Infra Fund.
Meanwhile, the PMAY scheme launched in 2015 aimed at developing 51 lakhs houses during 2017-18 as well as in 2018-19, imply the construction of more than one crore houses exclusively in rural areas. This bodes well for the rural housing sector and the vision of ‘housing for all’ may just turn to reality in the forthcoming future. The government will also establish a dedicated Affordable Housing Fund in National Housing Bank, funded from priority sector lending shortfall and fully serviced bonds authorized by the Government of India.
Education For All And Landmark Healthcare Initiative Announced
The government announced its interest to increase digital intensity in education, implying that technology shall be the key driver in improving the quality of education. The Finance Minister proposed to launch the program ‘Revitalising Infrastructure and Systems in Education (RISE) by 2022’ with a total investment of INR 1,00,000 Crore in the next four years, aimed at stepping up investments in research and related infrastructure in premier educational institutions, including health institutions. Furthermore, Mr Jaitley also proposed setting up 18 new Schools of Planning and Architecture as well as 24 new government medical colleges by upgrading existing district hospitals in the country.
In a landmark stand, the government announced the Flagship National Healthcare protection scheme, with approximately 50 Crore beneficiaries, which would entail up to INR 5 lakh per family per year for secondary and tertiary care hospitalisation. This is touted to be the world’s largest government-funded healthcare programme. Meanwhile, INR 1,200 Crore would be allocated to the Aayushman Bharat programme that will necessitate the establishment of 1.5 lakh centres to provide health facilities.
Infrastructure Receives A Boost
Infrastructure received an impetus with the allocation of INR 11,000 crore for Mumbai rail network and INR 17,000 crore for 160 km of additional suburban railway network in Bangalore. On the Smart Cities Mission front, out of the 100 smart cities aimed at by the initiative, 99 cities have been selected with an outlay of INR 2.04 lakh crore. The government, further, propose to develop 35,000 km under the Bharatmala project phase 1 with an outlay of INR 5.35 lakh Crore, while railway capex has been pegged at INR 1.48 lakh crore, up from INR 1.31 lakh crore last year. Besides this, the National Heritage City Development and Augmentation Yojana has been taken up significantly to preserve and revitalize the heritage cities in India.
Long-Term Capital Gains On Equities
The budget introduced a long-term capital gains tax of 10% if the gains exceed INR 100,000 without allowing the benefit of indexation. However, all gains till 31st January 2018 will be grandfathered and short-term capital gains remain unchanged at 15%.
Push To MSME Sector
The Union Budget, striving to address the issues faced by micro small and medium enterprises (MSME), reduced the income tax to 25% for small companies with annual turnover of up to INR 250 Crore. The budget also earmarked INR 3 lakh Crore for 2018-19 under the Pradhan Mantri Mudra Yojana or Mudra scheme. In addition, the Finance Minister also allocated INR 3,794 Crore for credit support to MSMEs.
While the realty fraternity harboured hopes of relief measures such as lower taxes, rationalisation of the GST rates and infrastructure status, the Union Budget of 2018 decided to focus on strengthening agriculture and rural economy, providing healthcare to economically less privileged, care for senior citizens, infrastructure creation and working with the states to provide more resources for imparting quality education in the country. This budget, hence, is a measure aimed towards improving the rural sector, that forms almost two-third of the country’s population. This eventually shall work towards creating an equal economy in the country.