The 2019 interim budget has proven to be pro the real estate industry, which was an expectation as historically interim budgets have favoured three sectors – farmers, the middle class and real estate.
This budget laid focus on several real estate positives such as underpinning government commitment towards housing for public and providing tax exemptions to developers. This positive stimulus will help real estate developers source more funding and increase employment. There will be an improvement in demand that will bring relief to the developers and improve liquidity.
Affordable housing got a good impetus in this interim budget. Apart from raising the taxable limits of the common man, there is a proposal to exempt tax on unsold housing units for two years. The benefits of affordable housing under Income Tax section 80(i)BA being extended for one additional year, for housing projects approved till the end of 2019-2020 is beneficial for builders and buyers.
Second Home Purchase
The liquidity slowdown had moved buyers away from the real estate market as an investment option. The series of sops for both buyers and developers should help perk up sentiment in the sector that has been going through a sluggish phase with inventory piling up across the country. It is now expected that buyers will re-enter the market to purchase houses. The elimination of tax on notional rent from a second self-occupied house increases the chances of purchase of a second home for many buyers. This is a positive trend that will improve the liquidity situation for the real estate market.
Capital gains of up to Rs 2 crore, generated after selling a property, can now be invested in more than one property. The extension of capital gains to be used for purchase of two residential houses for an individual is good for demand of affordable housing. This is a good opportunity for upgrading homes or purchase more property. This will allow people to have a diversified portfolio for real estate investment – which will spur demand across the country, including Tier 2 and Tier 3 cities.
The one area that there has been no change is GST. Developers were hoping for a reduction in GST rates from the current 12% but at the moment the government has only instituted a review panel of ministers which is a positive step. There was an earlier promise of reduction in GST but at the moment that decision has been delayed.
The industry status also has not been granted in this budget but developers are overall in higher spirits about the other initiatives which will bring a huge relief to the buyers and builders.