In a democracy, the opinion of the people matter, and it should. Any policy which is said to be formulated to achieve higher economic growth or other social objectives has to find the support of the majority. Otherwise, even a well-strategized policy can fail. But when you have various interest groups expecting a lot from one event, policy makers really struggle to strike a balance. To ensure they can’t keep satisfy one group while dissatisfying the others, policy makers tend to adopt the approach of inviting suggestions from all of them. Eventually, the decision makers may give preferences to those suggestions that are likely to make the policy effective.

The Government rolls out its fiscal policy at the Union Budget, affecting almost all Indians to a greater or lesser extent. Adopting a unique approach, the Government welcomed suggestions from the people through various social media platforms. Moreover, the Government is collecting public preferences concerning the sectors (such as Agriculture, Industry or services) they feel should get priority in the Budget 2016-17. So far, this feedback the Government has received, indicates that there should be more focus on farmers and the middle class.

Farmers and the middle class are the two pillars of Indian economy. Unfortunately, policy makers have failed to address issues troubling these two sections of society.

Does anyone really care about the Indian farmer?
As political parties play the politics of convenient responsibility, high profile and over-hyped suicide cases get undeserved attention. When a farmer ends his life, you may hear some sympathetic statements from the Government and the opposition (doesn’t matter who runs the Government). Shedding crocodile tears over farmers’ suicides and disrupting the Parliament over this issue seems to have become a new fashion statement among politicians. Sadly, the gross injustice and suicides of numerous farmers across India doesn’t pinch the souls of politicos. Yet, unfortunately, no concrete solution or social reforms has been implemented to improve the situation of the Indian farmer. Hopefully, spruced up crop insurance scheme of the Government may offer some relief to distressed farmers. While the allocations made towards irrigation schemes are paltry. It is clear from the opinions of citizens supporting the reforms for this section of society, they want answers and long-term solutions.

Is the Government taking the middle class for granted?
The Middle class, on the other hand, is grappling with a different set of issues. It is burdened with the highest number of taxes, directly and indirectly. Though this section has many aspirants, the middle class provides little firepower to politicos, and as a result it has lesser bargaining power with the Government. The one common, yet the most important, expectation of the middle class is to have their own home. Unfortunately, housing prices are going out of roof, dashing all hopes.

On this backdrop, the budget wish list of the real estate players appears ludicrous. You might get a feeling that real estate developers are living in the state of denial. Just look at some of their demands:
 

• Builders want tax SOPs from the Government because taxes are inflating the property prices by as much as 35% in some states.
• Developers believe, property buyers should be allowed to claim the tax deductions upto Rs 3 lakh for their payment of interest on housing loans. The existing threshold limit is Rs 2 lakh.
• Real estate players aspire to see the industry being awarded the status of infrastructure. Such a change in the status would offer a number of benefits to the sector.

At present, the real estate sector is passing through one of its toughest phases. The demand is stagnant in big cities and the inventory is piling up so much so that, it would take another 3-4 years to clear existing stocks.

The real worries are...
 

• Speculative demand has created a pile of inventory. Those investing in the initial phases of construction of property wish to exit at higher rates. They have a longer holding capacity, which is why you don’t see real estate prices falling despite the softer demand.
• Under-the-table expenses, that can’t be accounted for, actually inflate the cost of construction and not just the taxes. Taxes are not charged randomly. They are always linked to the property value in some or the other form. Unless the “kickback” culture is kicked, the property prices are unlikely to go down.
• These days you would find more bouncers at developers’ offices than you would find outside a posh club. Why do they need this much protection? Who are the people posing them a threat? Gullible home seekers? The Government can’t turn a blind eye to these issues.
• Political interference, the high-handed attitude of local and regional politicians, and shady practices have earned this sector a bad name
• Only a myopic-sighted person will consider investing lakhs of Rupees in an unattractively-priced property just to avail of additional tax deductions. Therefore, increasing the threshold limit of deduction on the payment of interest on housing loan is unlikely to improve the property demand. Irony is that property prices are so high, many potential buyers are unable to apply for a housing loan as their incomes are too low compared to the amount they need to borrow to buy the house.

The fiscal policy and budgetary announcements can’t address all the issues that trouble the real estate sector. In fact, unless, the Real Estate Regulatory Bill gets cleared in the Rajya Sabha, we can’t expect significant improvements. Even after it is cleared, unless the black money-propelled price speculations are nipped, property buyers are unlikely to receive attractive offers.

Those who feel real estate prices will never fall might be at the receiving end of a knock-out blow in times to come. The affordable housing schemes look good on the paper and in political manifestos. In reality and realty, it remains the graveyard for black money. Smart cities can’t hide the ugly truth about the Indian property market.

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