What is in the Budget For Me? – Real Estate Industry Reactions to the Interim Budget 2019

The Union Finance Minister, Piyush Goyal presented the interim budget for the Narendra Modi-led government yesterday. Despite being a pre-election budget, the budget appears to have managed a tight-rope walk by adopting a conservative approach and still managing to offer sufficient sops to be a welcome crowd pleaser.

How does this budget impact the real estate industry? More importantly, how does it help existing or new home-owners and prospective home-buyers. We asked some of the experts of the real-estate world to help us decipher the budget and understand its impact on housing.

Boman R. Irani, Chairman & Managing Director, Rustomjee GroupM

The budget announcement has been affirmative by opening investment market for second homes. Tax rebate for income up to Rs 6.5 lakh under 80C will accelerate investments in the housing sector. With RERA and Benami Transaction Act bringing in tremendous transparency in the sector, there has been a surge in housing demand from the NRI community.

The government’s proposal to extend the period of exemption from levy of tax on notional rent, on unsold inventories, from one year to two years is a good rational move. The lowering of GST on properties is a positive move provided that ITC is continued thereby allowing a real reduction in prices to consumer.

Amit Ruparel, Managing Director, Ruparel Realty

The Union Budget 2019 is optimistic for the sector as it will provide ample opportunities for the home buyers to invest. Enhancing the exemption limit for the general category of individual taxpayers will increase the buying capacity of the potential home buyer thereby providing a boost to achieve ‘Housing for All’.

The Section 24 benefit of relieving second occupied houses from tax on notional income and the benefits of rollover of capital gains in two residential houses would help in reviving the real estate market. Raising the TDS threshold on rental income to Rs. 2.4 lakhs and bank deposits to Rs. 40,000 will be a huge relief to the taxpayers. Also, builders do not have to pay notional rent on unsold flats for two years after the year in which the construction is finished, which is a considerable step, given current scenario. Extending the benefits under Sec 80(i)BA for one more year for all housing projects approved till the end of 2019-2020 will further boost the demand in real estate industry.

However, we were hoping that the finance minister will grant infrastructure status to the housing sector to give a fillip to the industry. We were also expecting single window clearance which would have been beneficial for both home buyers and the developers. We are now looking forward to the decision of the GST council that will help in reducing the burden on the homebuyers and give the necessary impetus to revive the sector.

Ashwin Reddy, Managing Director, Aparna Enterprise Limited

Infrastructure and construction industry received notable sops during the interim budget which also benefits allied sectors like real estate. Significant boost has been given for rural development by sanctioning Rs 19,000 crore for this fiscal; however, allocations and actual pay-outs towards these projects will define the future course.

We were hoping for announcements on GST reduction for building material sector and flexible income tax incentives for the affordable housing category. Nonetheless, it is time to wait and watch how the GST Council will reduce the burden on home buyers in the coming months.

Rakesh Reddy, Director, Aparna Constructions and Estates Pvt Ltd

Union Budget 2019 highlights the far-reaching magnitude of the real estate and infrastructure sectors on India’s overall economic performance. Building the physical and social infrastructure for a 10 trillion dollar economy requires a concerted effort from all parties.

The announcement with the largest impact on the real sector is the revised income tax slabs that reduce overall tax expenditure. This will enhance the ability of the salaried class to service their loans and therefore invest in real estate and widen the market opportunity for players in the sector. There are also other direct and indirect benefits for the housing sector and in particular the property developers.

The notional tax that was payable if a property was unsold for a year has now been extended to two years taking into account the fact that there is an increase in the stock on unsold properties. In addition to that, the deduction under section 54 with regards to capital gains has been amended to give the exemption for two houses as opposed to one house. A notional tax that was levied on the second self-occupied property has been removed and is also a big positive for a middle income person.

While the above announcements in the interim budget coupled with the recent policy reforms are expected to create more stability over the long term, there are aspects which need to be addressed for a strong market revival. Chief amongst these is the reduction of GST on under-construction properties. It was announced that the GST Council will address this in the near future. This decision must be made at the earliest. The lingering possibility of a GST reduction only delays buying decisions and further stalls growth. A clear outcome will boost home buyer confidence and revitalise the sector.”

Madhusudhan G., Chairman and MD, Sumadhura Group

On many fronts, this is a favourable and bold budget for the real estate industry. Though many of the expectations, whether it is bringing in a structured single-window clearance or granting infrastructure status to the industry didn’t materialize, however the government’s stance towards reducing the GST burden on homebuyers is seen as a welcome move.  In its ambitious quest to become a 5 trillion economy in the next five years, the interim budget, viewed as ‘Vision 2030’, has struck the right chord on several fronts, whether it is building next-gen infrastructure or building stronger digital India.

Steps taken and the impact on the real estate industry, as I see it: 

• The step of making more homes available under affordable housing is in-line with government’s vision of ‘housing for all’.
• Giving impetus to the real estate sector, by extending the period of exemption from levy of tax on notional rent, on unsold inventories, from one year to two years, from the end of the year in which the project is completed is a slight relief to the developer community.
• The proposed step to exempt levy of income tax on notional rent on a second self-occupied house is well addressed. 
• Steps which include rollover of capital gains tax on the sale of houses from one to two houses, and full tax rebate for individual taxpayers having taxable annual income up to Rs 5 lakhs is definitely a bold move and a great relief to the Indian salaried class.s

Rishi Das, co-founder and chairman, IndiQube co-working/ managed workspaces

Happy to see an SMB and middle class friendly budget which seeks to provide further incentives to the startup and SMB sectors, and the scope has been further magnified. On the consumer end, the immediate relief, specifically for the middle class, is the reduction in tax rates. 

With regards to housing, the long term capital gain is now applicable for two house purchases, which means, this should give boost to the real estate economies (residential). This should further increase the economic growth as well.

Parveen Jain, Vice Chairman NAREDCO & CMD, Tulip Infratech

The Interim Budget 2019 is buyers-friendly with the announcement of tax rebates and incentives that are going to increase the investment and buying power of the common man. The biggest of these are the “No Taxation” for annual incomes upto 5 Lac and the gratuity limit having been increased from 10 lac to 20 lac. The major highlight is that Rs 1 lac crore has been granted for Affordable Housing scheme which shall give a tremendous boost to achieve the PM’s mission of ‘Housing for All by 2022’. The government has also recommended to the GST council to reduce GST rates for home buyers.

Other major highlights include benefits under section 80(i)BA will be extended for one more year for Affordable Housing projects approved till 31st Dec 2020. The benefit of rollover of capital tax gains shall be increased in investment from one residential house to two residential houses for a tax payer having capital gains upto 2 crore rupees, which can be exercised once in a life time. Benefit in notional rent has been given in unsold inventory from one year to two years.The ceiling limit of TDS for rent has been increased from 1.8 lac to 2.4 lac per annum.