The Indian real estate industry has been plagued with multiple issues over the past couple of years. Week sentiments and sluggish sales resulted in stress across portfolios.

The impending Real Estate Regulation Act (Rera) has been extensively analysed and debated across buyers and developers. With buyers embracing a wait-and-watch approach to invest with the protection being offered by the government and developers taking adequate steps to be Rera-compliant, if not already.

While the market was still digesting these realities, demonetisation hit the industry hard. Real estate is one business that has had an immediate and significant impact.

The business face liquidity issues, poor sales, debt and stress levels, while private equity and NBFCs also started tweaking their real estate investment strategy. With Prime Minister Modi’s impetus on affordable housing, the sector was hoping for ‘Ache Din’ for itself through announcements in Budget 2017.

It was awaited with bated breath with everybody glued to their TVs seeking some initiatives to improve sector sentiments. It was left with a partial sweetener.

The budget had high focus on infrastructure and job creation all of which aid development and create demand for housing by putting money in the hands of middle-class. However, the real estate sector was looking for direct stimulus.

Although, the slowdown is not in the affordable housing segment, businesses catering to mid-income and high-income groups were expecting benefits directly or for purchasers, which could improve sentiments and get the ball rolling for sales. Some of the expectations were greater income tax benefits on interest/principal repayments of housing loans and new tax slabs so that there is more money in the hands of key spending categories, and higher house rent deduction allowances.

These benefits could have improved the sector’s performance and developers would have some reason to rejoice.

However, the budget certainly has outperformed in the affordable housing segment with key announcements that made it lucrative for developers to enter that space. It received the highly coveted infrastructure status which will substantially reduce cost of borrowing.

The subvention scheme offered by the Prime Minister on housing loans for the affordable segment is also making cost of borrowing cheaper. Another key announcement was that the income tax exemption offered to these projects was changed from three years to five years.

The classification of units has also been changed — now in the four metro cities affordable houses are classified as houses with 30 square metre carpet area within the corporation limits and 60 square metre carpet area outside corporation limits. However, in non-metro cities, affordable housing is classified as units with a carpet area of 60 square metres.

The above announcements have generated lot of interest in affordable housing with many developers wanting to enter this space. However, time will tell how many players can establish themselves.

Until then the mid- and high-income housing business will remain sluggish with a hope that other industry initiatives will put money in the hands of buyers resulting in higher sales and cashflow.

The writer is National Director, Capital Markets & Investment Services, at Colliers International India.