How 7th Pay Commission will boost real estate sector?

seventh pay commission

The Union Cabinet has passed the recommendations of 7th Pay Commission with a substantial raise of salaries for central government employees and pensioners. In a move, which results in a total of Rs 1.02 Lakh Crore of financial impact in the ongoing financial year, the government has decided to implement a 23.5 percent hike in central government employee salaries including all allowances and benefits. The real estate sector can also feel the momentum with the centers move as several provisions mentioned under the recommendations pinpoints to the burst of real estate activities all around the country in the coming years. Here are the major highlights of the 7th Pay Commission Report that will impact real estate sector.

  • The starting salary slag will be now on Rs 18,000, as stated against the previous amount of Rs 7,000. The maximum slag for apex scale is Rs 2,25,000 per month and for cabinet secretary and others in the same pay level will be Rs 2,50,000 per month. This means that the overall urban expenditure is going to see a drastic change as the purchasing power of employees will increase.
  • The hike will be implemented from paychecks in August 2016 with effect from January 1, 2016. The six month arrear will be dispersed during the ongoing financial year itself. This means that the employees are getting a significant lump sum amount of money which can be used for real estate investment purposes.
  • real estate india

    The gratuity slag of Rs 10 Lakh has been notched up to Rs 20 Lakh and the housing loan allowance has significantly raised from Rs 7.5 Lakh to Rs 25 Lakh. The increase in housing loan will bring more liquidity and money will increasingly flow in real estate sector. Coupling this, earlier, the EPFO had also allowed employees to withdraw the entire PF for housing purpose.

  • Pensioners are also a major part of the beneficiaries of the new pay commission report. As there are more funds available for pensioners, they are likely to invest in an alternative lifestyle outside their home, especially in a place where nature brims at its best. This signal for an upswing in the demand for retirement homes in Indian real estate market.
  • Once again the affordable housing is seeking more demand as more middle class employees are touted to engage in home buying with availability of more disposable income. This will also contribute to the nodal clause of central government ‘Housing for all by 2022’ and also stabilizes our economic growth. The demand is expected to be spread uniformly across India.

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