FM's Infra Push Opens New Vistas For Real Estate Investors

Many of the expectations real estate investors had from the Union Budget 2018-19 have not been fulfilled. However, some announcements are expected to indirectly trigger investment in the real estate business, helping them reap the benefits.

Various infrastructure projects and a special thrust to affordable housing announced in the Budget are expected to open up new avenues for the real estate investors.

New homes to create new investment opportunities

Along with forming the Affordable Housing Fund, Finance Minister Arun Jaitley announced that nearly 31 lakh homes will be constructed in the urban while 49 lakh homes will be built in rural areas under the Pradhan Mantri Awas Yojana (PMAY). This is good news for investors who want to put their money in the affordable- housing segment. Affordable housing was given an infrastructure status in the Union Budget 2017-18, which allowed developers to access institutional credit and reduced cost of borrowing for affordable projects.

Infra expansion to give way to new real estate pockets

The government is upbeat about infrastructure development with a massive investment estimated to be in excess of Rs 50 lakh crore. Under the infra plans, the FM announced various projects for railways, road and air transport. The two projects that will help expand the key real estate markets are the expansion of suburban networks of Bengaluru and Mumbai. The FM announced, “Mumbai's transport system, the lifeline of the city, is being expanded and augmented to add 90 kilometre of double-line tracks, at a cost of over Rs 11,000 crore. Also, 150 kilometre of additional suburban network is being planned at a cost of over Rs 40,000 crore, including elevated corridors on some sections. A suburban network of approximately 160 kilometre at an estimated cost of Rs 17,000 crore is being planned to cater to the growth of the Bengaluru metropolis.” 

This expansion is expected to boost real estate in the suburban areas of these two cities, posing an opportunity for investors.

“These two cities (Mumbai and Bengaluru) have space crunch. Coming of the new networks will see coming of new micro-markets in the suburbs. This will in turn give boost to the real estate market in these areas,” says Ankur Dhawan, chief investment officer, PropTiger.com. 

One's loss another's gain 

The FM has announced taxing of long-term capital gains (LTCG) exceeding Rs 1 lakh at the rate of 10 per cent without allowing the benefit of any indexation. Will this discourage the equity investors? Does this mean that investors will look for a new avenue for investment? Will that avenue be real estate?

“The LTCG levied on equities may be contribute to having investors look at alternative assets in real estate is something that is left to be seen,” says Shubika Bilkha, business head of The Real Estate Management Institute (REMI).