What the Budget told us about Realty?

After years of being relegated to what many may term as a “step motherly” treatment, to suddenly becoming the “blue eyed” boy of policymakers, real estate is finally getting its place under the sun and how. The sector went for a slowdown when it was negotiating with a plethora of structural and financial reforms such as demonetization, GST, Rera, but it seems to be geared for growth with a “favourable” budget. The budget has unequivocally elicited positive response from majority of stakeholders. This despite the fact that there were no significant incentives or exemptions for the sector such as the much demanded “stressed asset fund” or “industry status” or “single window clearance”. But there were many direct announcements for the real estate sector such as extension of Section 80IBA for one year, no interest on notional rent till two year of completion of project, reinvestment of capital gain in two houses rather than one and no tax on notional rent for 2 self-occupied houses. There were multiple tax sops. The reforms were incremental and not structural but nonetheless, they will fuel demand and supply, at least in some quarters.

“I would rate the budget as 9 out of 10”, says Dr. Niranjan Hiranandani, National President, National Real Estate Development Council (NAREDCO), “because the Minister has laid out the path to successfully work out a balancing act. 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. He has given tax breaks, enhanced benefits while not increasing taxes – and yet, has shown a roadmap that will keep fiscal deficit in control.”

DLF’S Ceo Rajeev Talwar, said that the “budget deserves 9.5 points out of 10 on creating a dynamic, promising and confidence-building environment in India. As the economy is projected to become a US$ 10 trillion economy in next 8 years, the government has rightly focussed on roadmap for the developmental transformation of the country.”

The impetus to affordable housing was visible, both from the developers’ as well as the customer point of view. The extension of the tax holiday benefit for developers for affordable housing projects by one year (for projects approved till 31st March, 2020) under section 80 I(B) (A) will enable creation of affordable homes. “The budget has ensured lower tax burdens not just on developer but also on the consumer for the purchase of homes, what with individuals with net taxable income upto Rs

5 lakhs not requiring to pay any taxes,” says Navin M Raheja, CMD, Raheja Developers Ltd. “Moreover, under Section

80-IBA, Government has given one year further extension for getting approvals for affordable housing which will give boost to this segment of housing. Both these above benefits to consumer and developer together will accelerate demand for affordable housing in the country.”

The Government has given sufficient reasons for real estate to rejoice in this budget, says Proptiger’s Ankur Dhawan adding that the announcement of doubling of NIL income tax slab from 2.5 Lakh to 5 Lakhs will have much stronger impact on real estate sales especially for affordable housing buyers. He feels that not only government is giving credit link subsidy scheme for these buyers but also leaving more money in hand to pay EMIS through increased tax savings.

The industry overall is celebrating the changed direct tax implications as it automatically increases the disposable income for the middle-income groups. According to Shishir Baijal, Managing Director, Knight Frank, “A back of the envelope calculation on the new standard deduction rates and other direct tax sops give us a figure of an annual taxation exemption of almost Rs 7- 9 lakhs per annum. We believe this step along with the increased standard deduction limit will in some way translate to an improved affordability for house purchase, and a fair part of the savings from this could be channelised towards real estate.”