Is real estate a good investment after budget 2020?

The budget is one event that the real estate sector eagerly awaits to see if their demands to revive the industry have been taken up. While the 2020 budget did bring its own set of surprises for developers and buyers alike, it also left out many critical points that the real estate industry was hoping would be considered.

A few key points that will affect the real estate industry are

Higher infrastructure spending

The finance minister announced several large projects that would be taken up for infrastructure development. In the pipeline are 6,500 projects with a total allocated value of Rs 27,300 crores. Strategic national highway development was another key boost to the commerce and real estate industry.

Affordable housing push

The previous year’s budget had introduced a tax benefit for affordable housing which is being continued this year as well. There is an additional deduction up to Rs 1.5 lakhs on loans taken to purchase an affordable home, which will be valid till March 31st, 2021. This one-year extension is expected to favorably impact the demand for the sector. This tax holiday will definitely work in favor of the affordable housing market and should see many new buyers opting for affordable using options.

Dual Tax slab options

The government has proposed a dual tax slab option that allows individuals to have more flexibility with their investments and tax rates. This will increase the disposable income to ensure that there are more buyers for the housing sector. While on the surface this seemed like a good move, many experts have weighed in saying that it may not actually have as much benefit as envisioned in terms of increasing the disposable income in the hands of buyers.

Abolishing deductions

The FM proposed to abolish 70 deductions of tax exemptions. While the dual tax slab seemed like a good option, a few experts have commented that the non-applicability of the deduction of housing loans under the new slabs might be a deterrent for those contemplating taking housing loans.

Smart City development

There was an announcement to develop 5 new smart cities under the PPP model and this is likely to increase the investment into residential and commercial real estate in these key cities. This boost in investment might attract new investments also and thus ensure that new real estate markets are developed. Again the effect of this development may not be as immediate as envisioned and might take several years to show real benefits, especially to investors in real estate.

Overall the budget has focussed on maintaining fiscal discipline, but the liquidity crunch does put a dampener on the overall sentiment for the real estate industry. The industry needs bolder measures to revive hence the current budget will not make a big impact in terms of helping the real estate industry.

Leave a Reply

Your email address will not be published.