Announced in the parliament by the interim FM Piyush Goyal, the budget 2019 acknowledges the slowdown in the real estate sector. The budget has outlined a number of measures to ease fiscal burden of developers, along with incentivizing the homebuyers ahead of the next general election.
Pankaj Kapoor, founder and MD at Liases Foras said that it is an interesting budget for real estate sector. According to him, the government has attempted to help the industry come out of the slowdown by extending exemption for inventory tax on builders from one to two years and a number of other measures to push up demand.
The unsold inventory over one-year-old was considered stock-in-trade till now. Also, the builder had to pay notional rent on such units. Considering unsold inventory levels amount up to 6.3 lakh across top seven cities of India, the outgo from builders was huge. “Increasing the exemption from paying notional rent from one to two years will provide respite to builders,” he added.
In the opinion of Jayraj Builders Vadodara founder and MD Jayesh Dave, the government has taken the right steps for minimizing the risk associated with the high levels of unsold residential inventory. “This could have posed a risk to liquidity in the markets, affecting both builders and banks,” said Jayesh Dave.
The Jayraj Builders Vadodara MD also welcomed the government’s move to extend Section 80-IAB, which allows 100 per cent deduction on profits generated by developer or builder of affordable housing project, till March 2020. “This (the budget) has helped relieving the pressure in the affordable residential housing sector. The measures announced now are more delivery-focused,” Jayesh Dave stated.
Benefiting the consumers, the government has aimed at facilitating sales of second homes by relaxing norms for genuine self-occupiers, who already possess a house. Consumers do not have to pay tax on notional rental income for self-occupied second homes, where family is living. In case the property is let out, no TDS will be deducted up to Rs 2.4 lakh. Earlier, this limit was Rs 1.8 lakh. According to Anarock Property Consultants Chairman Anuj Puri, this can attract more investors to buy second homes for earning rental income.
Puri said, “By exempting notional rent for self-occupied second homes, the government has attended to a significant pain point for the middle class, especially migrants with dependent parents. Combined with capital gains exemption for up to two houses, this will allow people to have a diversified portfolio for real estate investment. It will spur demand across the country, including Tier 2 and Tier 3 cities.”
Capital gains of up to Rs. 2 crore generated after selling a property, can now be invested in more than one property. It is an opportunity for people to upgrade or purchase more property. It will incentivize buyers while avoiding speculators.