Union Budget 2019: Expectations From Banking Sector, Financial Services Sector And Real Estate Sector

Prologue: As part of our series focusing on the Union Budget 2019, we’ll be highlighting the opinions of industry experts and see what they think and expect from this year’s Budget. In this article, Amit Pandey, who’s an expert in the financial services sector talks about his Union Budget 2019 expectations. Read on!


My Union Budget 2019 expectations start with the banking and NBFC sector. Ideally, the banking and financial services sector should be the Government’s biggest target to grin about a change. Other than these, there needs to be a major trigger for the automotive sector as well as the agrarian sector. Considering the latter is a major factor in driving consumption, it is important to ensure that the sector does well to drive consumption in the economy.

See, till now, the government has a single-point strategy for the agricultural sector, which is waiving off the farm loans, which I believe isn’t essentially helpful. You give loans and then you waive them off but it’s only a fraction of the population of farmers who are able to avail the benefits of the waivers due various intricate terms and conditions, while the others continue to struggle.

Typically, it has to do with fixing the right price for the farmers’ produce, how it’s carried to the warehouses, how it reaches the market, and how they get the right price for what they produce. If a farmer is producing tomatoes and they’re getting sold at Rs. 2/- only, it makes no sense. Therefore, instead of subsidies, it should be ensured that there is a fair price for their produce.

Union Budget 2019 Expectations In Real Estate and Financial Sector

The economy is facing a chain reaction, right now. We are almost at the verge of a deep crisis and if we don’t correct the financial sector right now, it’s going form a vicious circle. After the implementation of GST and demonetization, pressure came on to the real estate sector.

Now, the real estate sector employs a lot of people in the unorganized segment and forms the core of a lot of industries like cement, steel, iron, etc. When the real estate sector was in stress, it was going to the NBFCs for finance because banks consider real estate to be risky. So, the likes of L&T and Piramal were financing the sector players which was keeping the industry afloat, hoping that when the sector revives, the real estate players would be selling their inventory and that’s how NBFCs would be recovering their money.

After the IL&FS default, it has triggered a crisis on the NBFC sector and the NBFCs aren’t getting any funding from banks. Most PSUs are under problems of their own such as PCAs, capital inadequacy, etc., and while some of them have started to recover, not all of them have followed the same path.

So, the banks had an easy pick to lend to the better-rated NBFCs, which were then lending to the agrarian sector and automotive sector.

So even if a farmer had to buy a tractor, NBFCs were there to help these people in the rural areas. But since the NBFCs are not getting funding, everybody is taking a hit. Statistics have shown a 35% dip in terms of NBFCs lending to different borrowers.

This affected the real estate sector because of the unsold inventory, the projects remain incomplete, then the home buyers lose interest and that results in multiple schemes of the Government not taking off and this takes a tool on the sentiment of the people.

Union Budget 2019 Expectations In Automotive Sector

So, whenever there is an auto slow-down, the best option that auto dealers had was to go for dealer finance or channel finance, which was being taken up by companies like Tata Capital, etc. The stress on the automotive sector is because of the disparity in demand, which has been triggered because of a steep decline 2-wheeler sales as they’re primarily from rural areas and Tier-III cities, as part of the agrarian population.

Seeing the stress in the agrarian society, the farmers, etc. have delayed their purchases and the auto industry is not being given the opportunity to undertake financing options from NBFCs, as the NBFCs aren’t getting their funds.

In order to combat this vicious circle, 3 things need to be done:

  • Getting the sentiment right
  • To get the sentiment right, the Government needs to take proactive measures about what it does for NBFCs, agrarian sector and bringing in norms which help ease out the funding process of the NBFCs
  • Taking positive steps to ensure the faith of the farmers is restored regarding the sale of their crops and their consumption is kickstarted

The real estate sector has already seen a major change, thanks to the implementation of RERA and demonetization. The issue is the availability of funds to complete the projects and the buyers coming in to buy the projects. Both are in a bit of a rut and unless NBFC funding isn’t being strengthened, there seems to be a bleak chance of a way up.

The homebuyers owed to the unrest in the economy end up looking for finished projects rather than investing in unfinished projects. Therefore, the sentiment needs to be brought back to a more positive note, as I mentioned earlier.

Budget 2019 Expectations For Individual Tax Payers & Summary

To my knowledge, I don’t see any major changes in terms of individual taxpayers. The government to its best, gave a decent amount of exemption in the previous interim budget, including for senior citizens.

This budget should be dedicated to corporate India, bringing in the right sentiment. There’s a lack of trust among various stakeholders and institutions. The banks aren’t trusting the NBFCs, the NBFCs aren’t trusting the businesses, the businesses aren’t trusting the Government and the Government isn’t in a position of getting what it wants. Say, the Government wants appropriate funding from RBI flowing into the economy, which the latter seems to be delaying due to some or the other reasons.

There’s a lot of skepticism and lack of trust which needs to be amended, as there is a rush in terms of introducing too many changes.

If these issues are extensively looked at, I believe it’ll definitely trigger a cycle of improvement via this budget and that’s exactly what my expectations are from it.

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