Monday, February 10, 2020

A Ritual Named Union Budget & Real Estate!

“Don't tell me what you value, show me your budget, and I'll tell you what you value.”... Joe Biden.

Joseph Robinette Biden Jr. is an American politician who served as the 47th vice president of the United States from 2009 to 2017. Biden also represented Delaware in the U.S. Senate from 1973 to 2009. A member of the Democratic Party, Biden is a candidate for president in the 2020 election! Needless to say when such words are spoken by a person who is contesting world’s most powerful country’s head post, they do carry lots of weight! Indeed USA also has many leaders who are just “boal bachhans” yet it’s most leader’s opinions or thought process does amazes me always in comparison with our most leaders! Needless to say above quote of Mr. Biden I remembered as our yearly ritual was just through, yes I am referring to Union Budget or The Budget! Every year come Feb & all eyes, ears, mind & whatever you call i.e. senses of the businessmen as well common man are directed towards only one thing that what Budget will bring for them & as usual it comes & went, with a handful understanding that they have really benefitted or hurt;  rest all the country forgets about budget the next day its announced & goes back to respective routine! There are many Memes & Jokes (forwards) a day before & a day after about the budget & its impact on various professions (read as common man), one particular I liked & that was… In India numbers of economic experts on 30th Jan= 785, on 31st Jan = 3,74,000, on 1st Feb= 3,74,000 & on 2nd Feb = 785! I think this explains the importance of impact of the union budget & its short life span, in minimum words rather figures. And then as per the rituals, the media covers key people’s reaction about budget & these are also mostly same, the top level businessmen (Ambanis’ & Adanis’ are never in this list) of every segment gives careful reactions, it’s like what they say in Marathi “tond dabun bukkayncha maar” means someone punches you hard in the belly but your mouth is gagged, so you can’t shout but absorb the pain in silence! Few industrialist which are not actually working says some sharp negative words about lack of vision in budget & stuff like that, opposition party’s leaders hails budget as against interest of common man (read as farmers, poor & others) while ruling party’s leaders praise PM & FM about their kind consideration for the common man as well industry & how this budget will give us (read as country) back glory & make India a super power on world horizon & the event or festival or ritual named budget is over! Nothing changes except names (and roles) of all above people in their comments about budgets & oh yes there always are photographs of some house wife or a auto rickshaw driver or some person travelling in PMT (I still can’t call it PMPML) as well some young IT guy or girl as how budget has made impact on their life, how can media forget common man after all!

I wonder whether in USA or any such developed country there is such hype about the budget which actually is just a routine part of administration of the country, I am sure there must be some talks but not such frenzy as the reason is before presenting any budget all or at least majority stake holders are taken in confidence & the budget isn’t something which you make overnight & submit! It’s a yearlong procedure or supposedly has to be that way, so you can keep eye on problems & issues affecting economy of every sector of the society & makes provision in the budget to solve that problem in a way which is acceptable to the concerned segment! If that’s done properly then nobody has to discuss much on the budget post its release as most people knows what’s been served through the budget, so there is no shock oh my god types impacting share market sentiments (which actually gets affected by anything why just budget)!

Well, now let’s keep aside all other segments & see how real estate is affected (is it really?) by this year’s union budget. If you have some memory left in the era of Google & Alexa then recall it regarding last three or four years union budget & reactions from the real estate leaders (there are still some left) & all are saying this year’s budget isn’t any good for the real estate for last nearly four years at least! Looking as those news headlines of their interviews about budget, I remembered Lagan movie’s dialogue of a villager who looks at passing clouds in the sky & comments “is saal bhi barish nahi hogi” i.e. there won’t be monsoon (rains) this year also!! So what’s the problem of real estate is actually, why they are not happy with any of the budget is something common man thinks about real state people (read as builders) especially when they earn so much profit that most people envy builders & their lives life style & yet they seems to be complaining about the budget not good, “baat kuch hajam nahi huai”! For that we need to understand what real estate’s problems are in first place, I mean present problems & first of it is sales are not good rather bad for last few years! This many will say is a general problem as even automobile sector sales has hit all time low & so are many other goods, how can govt take guaranty of sale of some product? Indeed, govt can’t & shouldn’t take guaranty of any good’s sale & real estate also is not an exception for this rule! But why sales are not happening is definitely something govt needs to look when demand is there & that’s the problem of real estate. Here is a simple example, if there is no demand for sugar & sugar sales are dropping, govt can’t make people to eat sugar forcefully but if people want sugar & yet sugar is not available in markets, does still the govt will do nothing about it? No, govt see that enough quantity of sugar is available in the market at affordable price & of good quality, for the demand for sugar! This is simplest analogy for real estate’s scene, which comes to my mind as an engineer as I am zero when its economics & finance like most common men in which real estate’s clients are also included! So, the problem or real estate & the country is, millions rather billions of people needs home to live which is their basic need & there are thousands of people in the market which are ready to fulfill that needs of the homes of these billions but something is going wrong as what these thousands of people are building is neither viable to the billions of home buyers nor its viable for the people who are building these homes & this has to be looked by the govt & for that budget is remedy which is not happening, is the problem of real estate!

And accept it that already with land prices all across the country going sky rocketing how the govt thinks of keeping home prices in control of which land is a raw material, is what I wonder! As on one side govt itself gives twice the market price of land for any acquisition in Urban areas & the same ratio goes to four times in rural areas, so how we expect these land lords to give land at cheaper rate for home building! And then a home is costliest commodity already as a basic Mercedes car comes at Rs 35 lac which is considered as luxury & for riches where as in the top ten cities of the country a one room kitchen flat comes nearly at same rate which is a basic need of masses, now you can see the problem real estate is facing! Here is where the govt must sit with real estate’s wise minds & then make the provision in the budget & not just going by some sentiments or some senior bureaucrats(with due respect) who themselves has not build even a two stored structure by themselves & tried to sell it!

And in the pain list first comes GST, as  no one will say don’t charge GST but there has to be rationalization in it & in a product like home which is nearly a thousand ingredients assembling outcome, with every item different GST, it’s a mess in the end to summit it & on top of it the client has to pay only 5% of GST that too if it’s a ready possession home then there is zero GST, so the builder is going to get rebate for the GST he has paid, no one has any answer or no one (read govt) doesn’t bother to answer is a bitter fact! And then there are such hundreds of issues at local levels as real estate is local govt controlled business & hundreds of agencies are involved in completing it & every agency wants its cut from the cake named home & yet the builder is supposed to load all these expenses on the end product (read as home) & sale it, which was possible till last few years, not anymore! As somewhere two things has happened, first is the home prices where homes are needed have soured out of buying capacity of the needy people & then the buying capacity also has reduced i.e. money which usually a person would have saved to buy a home, he or she isn’t unable to save that much & both these things has hampered the sale of homes. This aspect is what the budget must take in account via policies or say via taxation regarding the real estate industry, is simple demand of the real estate!

Nobody is saying make the GST or Income Tax zero on homes but at least consider this industry as an essential commodity, agreed the profit earning tendency or margins of the builders must be curbed as well the investors in the real estate also must be controlled from black-marketing type scene with homes (flats or land) but at the same time any business survives on investors as what are even the Nationalized Banks but investors, isn’t it! And see their lending policies or interest rates which are charged for the real estate, they are worst than any private money lender! Sorry my words won’t be liked by many bankers but rate of interest including all the surcharges goes to nearly 16% & above for housing project & then one has to give collateral of nearly equal amount of the loan so that funds also gets blocked & then who is carrying burden of all these interest as well funding cost but the end home buyer, so in the process of safe-guarding the banks (read as their profits) we have taken away homes beyond buying capacity of needy home buyers as well even the builders as with such finance polices no one will dare to be a builder anymore! This aspect is what the budget should cover is what real estate expects from budget!

And lastly a union budget has to be backed up by the execution policies of the govt as then only it gets some sanctity & when I say govt then for me PMC (local governing body), MSEDCL, Revenue, Environment dept, Urban Development, Income Tax dept, GST dept & every that table which ask me for some NOC or to submit some returns, all comes under the tag Govt! All these agencies must be in tune to make the home making easier & faster as then only a builder can build the homes which will be dear to the home buyers pocket & then only the builder will get some money after making a home! After all, why one is in any business may it be a real estate or wada paav stall in first place but to make some money with mental peace & satisfaction & if all three are missing even then there will be the entities in the business but you don’t need a fortune teller what kind of the business it will be then, mind it “Mia Baap Sarkar”, this is what real estate expects you to take in consideration the yearly ritual or festival we call budget!

Sanjay Deshpande 
Sanjeevani Dev.
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