In an initiative to improve the coronavirus affected economy, finance minister Nirmala Sitharaman announced a stimulus package of Rs 2.65 Lakh Crore under Atmanirbhar Bharat 3.0. With this, up to 15 percent of gross domestic product is added to the overall virus relief of the nation.

Key Takeaways of Atmanirbhar 3.0

The centre has agreed in the new package to increase the differential rate from 10 to 20 percent between the circle rate and agreement value. This will apply until 30 June 2021, for the primary sale only of residential units with a valuation of up to Rs 2 Crore. Currently, the IT Act Section 43CA limits the 10 percent distinction between circle value and agreement value. Thus both developers and homebuyers are likely to benefit from the change.

It is a clear additional financial benefit for homebuyers to round off the current offers and discounts. In addition, under Section 56(2)(x) of the IT Act, the impactful relief of up to 20 percent for buyers of these units for the said period will increase demand, particularly in the affordable and mid-segment segments.

This move will assist developers in clearing unsold stock. As per research by ANAROCK, there is approx. Rs 5.45 Lakh unsold units were priced up to Rs 1.5 Crore in the top seven markets, while another 49,290 units were priced between Rs 1.5 Crore to Rs 2.5 Crore.

The centre's decision to raise the difference from 10 percent to 20 percent would allow people who choose to buy to pay less with the decreased differential gap, making homeownership more affordable.

Effects on Unsold Inventory 

While many in the industry believe that it would help developers clear their unsold stock by increasing the gap between circle prices and agreement value, few think differently.

Ram Naik, Executive Director, The Guardians Real Estate Advisory, said, that the majority of the unsold inventory in metro cities is priced above Rs 2 Crore, primarily in the range of Rs 4.75 to Rs12 Crore. A uniform declaration would therefore have been better without the capping.

Reiterating similar views, the President of NAREDCO and Assocham, Niranjan Hiranandani, clarified that many projects in metro cities would not benefit from the announcement due to the Rs 2 Crore limit. He further added that one where this relaxation would also extend to commercial real estate transactions would have been the perfect scenario.

Enhanced PMAY-U Scheme

Pradhan Mantri Awas Yojana (Urban) made steady advances across states in five years after its introduction. As of August 2020, the country had already approved a total of 1.06 Crore houses, of which 33 percent or approx. Rs 35.18 Lakh homes are completed while the construction of 66.23 Lakh units has been grounded.

Another welcome move to achieving the ambitious Housing for All by 2022 is the extra outlay of Rs 18,000 Crore for PMAY-U. It will enable the grounding of 12 Lakh houses and the completion of 18 Lakh houses. This would help bridge the country's housing deficit to a good degree and is simultaneously an excellent engine of economic development by generating more jobs.

This is over and above this year's Rs 8,000 already allocated. It will translate into more houses and more opportunities for jobs. Finally, the additional outlay of Rs 18,000 Crore would also enable more developers to join the affordable segment.

Final Words

These steps would uplift the expectations of all stakeholders in the real estate industry. In the broader picture, these stimulus steps will go a long way towards creating employment and improving the country's infrastructure. Industry-wise, developers would be benefited by the rise in the threshold limit for circle rate and transaction value.

From the view of buyers, this would enable fence-sitters, along with the income tax relief, to expedite their decision to purchase or invest in a home.

By: Shailaja K