Home seekers have reason to be happy with the budget speech of the Honourable Minister Shri Piyush Goyal. For real estate in general and housing in particular, this is a positive budget speech. For the economy, it focuses on the farm sector and the middle class. I would rate it “9 out of 10”, because Shri Goyal has laid out the path to successfully work out a balancing act. The interim budget has given tax breaks, enhanced benefits while not increasing taxes – and yet shown a roadmap that will keep fiscal deficit in control.
NAREDCO had submitted a representation, with specific points that would benefit home seekers and the industry. It is satisfying that the representation was taken in the right spirit and we see some of those points reflected in the Budget Speech. It was also mentioned that there was an on-going effort to reduce GST burden on homebuyers with the formation of a Group of Ministers who are looking into this.
Among other points that were mentioned in the speech, the first to my mind would be extending benefits under Section 80-IBA of the Income Tax Act for one more year. This will enable creation of more homes under affordable housing. This will be applicable to housing projects approved till 31st March, 2020.
Secondly, with the aim of giving impetus to real estate, the budget has proposed extending the period of exemption from levy of tax on notional rent–on unsold inventories–from one year to two years. This will be applicable from the end of the year in which the project is completed. This will ensure that the slow-down in creation of fresh stock as a result of the current situation, where the exemption was only for one year, will be positively impacted.
Currently, families have to pay income tax on notional rent it they have more than one self-occupied house: one in the home-town and the other in a location where family members work or have a job. Considering the difficulty of the middle class having to maintain families at two locations on account of their job, children’s education, care of parents, etc., the Hon’ble Minister mentioned a proposal to exempt levy of income tax on notional rent on a second self-occupied house.
The benefit of rollover of capital gains under Section 54 of the Income Tax Act has been proposed to be increased from investment in one residential house to two residential houses for a tax payer having capital gains up to Rs 2 crore. This benefit can be availed once in a lifetime. The Hon’ble Minister gave the example of Mumbai, wherein a family sells a house in South Mumbai and buys two houses in suburban Mumbai, and the benefit of this was availed only on one of the new homes. Describing this as something that is becoming a norm across urban centres in India, the Hon’ble Minister said this would help families in a similar situation.
In my thought process, two things that could have also made it to this positive Budget speech, which were missing as regards the housing sector: granting of industry status to real estate as a sector, not restricting it only to the affordable segment; as also section 43-C of the Income Tax Act, wherein tax is levied when prices are reduced. Also, the NBFC deadlock and stressed asset problems could have been dealt with in terms of solutions in the Budget speech.
The one paradigm change in real estate, the new regulatory regime under RERA came in for mention from the Hon’ble Minister. He said RERA has helped in bringing transparency in real estate sector, and I concur. Shri Goyal mentioned that India is poised to become a $5 trillion economy in 5 years and aspires to become a $10 trillion economy in the next 8 years. This will obviously augur well for real estate and we look forward to positives in days to come.
~ Dr. Niranjan Hiranandani is President (Nation), National Real Estate Development Council (NAREDCO), which works under the aegis of Ministry of Housing & Urban Affairs, Government of India.