Budget 2019: Real Estate Industry Outlook

RE Budget 2019

With strong push to the affordable housing sector, exemption of national rent on second self occupied homes and extension of taxation for unsold inventories, the interim budget has brought cheers to the Real Estate sector with many industry leaders terming it as one of the best budget announced in the last decade.

NewsBarons connects with Real Estate industry leaders to share their views on the announced Budget 2019.

After positive budget, Home seekers look forward to GOM recommendations on GST in real estate

Dr Niranjan Hiranandani, National President, NAREDCO

Dr. Niranjan Hiranandani, National President, NAREDCO

We should see affordable housing get a boost as a result of positives mentioned by the Hon’ble Minister Shri Piyush Goyal in his budget speech. Top of the list would be extension by a year of Section 80-IBA of the Income Tax Act, this will play a major role in helping achieve the target of ‘Housing for All by 2022’, and will incentivize the real estate industry to make more homes available under affordable housing, given that housing projects approved till 31st March, 2020 will be eligible for this incentive.

Affordable Housing Gains Amidst High Electoral Pitch

www.newsbarons.comAnuj Puri, ANAROCK Property Consultants

The interim budget was more or less a vote bank-facing exercise – an electoral pitch that drew attention to past achievements. Vote-bank directed announcements included benefits to 12-crore small farmers via credit of INR 6k/year directly into their bank accounts, and also to 10 crore labourers by way of direct pension bonanza.

Direct and indirect positives for the real estate sector:

Boost to Affordable Homes: People earning up to 5 lakhs will get a full tax rebate. However, if one invests in specified Government saving schemes then the tax exemption extends to Rs. 6.5 lakhs. This can have good implications for affordable housing, but not really on the mid-income housing.

The Government also extended the benefit of tax exemption for developers by 1 more year, up to 2020 now. This, too, will give a push to the affordable housing segment.

Electricity for all by 2019 could have positive implications by making more far-flung areas liveable and therefore more viable for affordable housing.

The standard deduction for the salaried class was raised from Rs. 40,000 to Rs. 50,000, which definitely implies some increase in disposable income.

There was a decisive push to the second home market via exemption of notional rent on second self-occupied homes. This could boost the second home market to some extent.

Unsold Inventory Benefits: The period for taxing unsold inventory has been extended up to two years. This is a welcome move and will benefit the housing sector, as currently there are more than 6.73 lakh unsold units across the top 7 cities. Read more…

A populist budget that gives major boost to the real estate sector

www.newsbarons.comShishir Baijal, KnightFrank India

The interim budget for FY 2019 – 20 presented today by Minister of Railways & Minister of Coal, Piyush Goyal is very positive. We are pleased to see that the government has taken note of the issues faced by the real estate sector and has addressed them systematically. It has addressed both the demand and the supply side of the sector.

For the demand side, the budget has ensured better liquidity and lower tax burdens on the purchase of homes. The benefit of rollover of capital gains has been increased from one house to two houses, upto INR 2 Crores (once in lifetime), is a tremendous step by the government that will boost sales in both primary and secondary markets. On a broader canvas, the changed direct tax implications including exemption of taxes till INR 500,000 p.a. automatically increases the disposable income, especially for the middle-income groups. We believe this step along with the increased standard deduction limit will in some way translate to an improved affordability for house purchase, thus aiding demand for the sector. 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 INR 7- 9 Lakhs per annum. We believe that a fair part of the savings from this could be channelised towards real estate. Additionally, the provision of increasing the number of self-occupied properties from one house earlier to two houses now will augment the house purchase decision for people supporting families in another city/towns.

For the supply side, the government has taken into consideration the challenge of unsold inventory and has therefore increased the period of exemption for notional tax on unoccupied units from the prevalent 1 year to 2 years. This will give developers a big relief allowing them to concentrate on sales strategies. To further boost the affordable housing, the government has extended the benefits Under Section 80 (IBA) till 31st March 2020. The government’s commitment towards affordable housing continues and we expect to see more such projects coming into the market. The demand for housing is strongest in the affordable segment.

The Finance Minister has also reiterated the government’s commitment to consider a revision on GST implications on the real estate sector by mentioning that a special committee is reviewing the same. This assures us that positive steps are being taken in this direction.

With all the sops announced by the FM today, the fiscal deficit being at predicted 3.4 % further spells reassurance of financial discipline. We consider this budget to be one of the best in many years for the real estate sector.

A welcome budget for the real estate sector

Surendra Hiranandani, House of Hiranandani

It is an inclusive budget that focused on strengthening the agricultural and rural economy, healthcare, infrastructure, social inclusion, digital and employment generation in the country. It also gave a substantial boost to the residential housing sector.

The rise in individual tax exemption up to Rs 5 lakh will impact consumer sentiments positively. The tax savings that the salaried class stand to benefit will lead to higher consumption including investments into residential real estate. The proposal to raise the limit TDS threshold to Rs 40,000 currently will also provide relief to taxpayers who invest in bank deposits and various post office schemes.

Amongst the notable announcements for the real estate sector, the decision to eliminate tax on notional rent on second self-occupied house is a welcome move. This will prep up demand for second homes substantially.

Relaxation of notional rent on unsold inventory to 2 years will also ease burden on developers, who now have more time to sell their projects. Continued thrust on affordable housing through tax benefits on projects allows for expansion of this class of the asset even further. The benefit of exemption of capital gains up to Rs 2 crore for investment in two houses will increase sales in the residential sector.

The FM has brought about substantial improvements in both personal income and capital gains. This is extremely positive as compared to the slow incremental reforms of the past.

The decision to grant significant capital for rural development and infrastructure is a step in the right direction. The impressive development of roads, infrastructure over the last five years has been significant and if the same momentum is continued then the increased connectivity will have a positive rub off on all segments of real estate including commercial and industrial developments.

To sum it up we definitely believe that this budget has set the tone for future growth of the economy.

The best budget announced in a decade

Rajan Bandelkar, NAREDCO West

This is inarguably the best budget announced in a decade. Keeping in mind that we are a domestic economy, the Interim Budget 2019 mainly focuses on ensuring there is economic thrust given across, specially to rural and housing sectors.The major benefit for the real estate sector comes from the income tax benefits given to consumer base. No TDS tax on house rent of up to Rs. 2, 40, 000 per year and extending other tax benefits for affordable housing for one more year will promote an upward swing in the sector.On the other hand, No tax on notional rent for 2 years for unsold inventories will make sure that the developer community will obtain a good response for properties. Next Gen infrastructure like building of roads, airports and highways will make the connectivity more feasible adding more value to the housing sector. Moving ahead, Government is also set to focus on building social Infrastructure for Ease of Living and Shelter for All. All of these initiatives will translate and give a bug boost in acheiveing the Housing for All and add to the overall GDP and employment generation along with fulfilling the common man’s dream of owning a home.

The ‘New India Budget’

www.newsbarons.comRamesh Nair, JLL India

This is a progressive Budget that has the potential to usher the country into a new phase of development and growth. The ‘New India Budget’ as we would like to call it, is expected to boost the real estate sector and keep up the pace of development achieved in 2018. This budget is clearly focussed on both homebuyers and developers with unsold inventory, and addresses some of the key pain points of the sector. For affordable housing projects, the benefit under the provisions of Section 80IB-A (100% deduction on gains from these projects) has been extended for one more year, until 2020.

The tax relief on notional rent from unsold stock has been extended to two years. For buyers, no tax on notional rent on second self-occupied home, no TDS on rental income up to 2.4 lac per year and capital gain exemption under Section 54 of Income Tax Act to be available on two house properties, (up to 2 cr) once in a lifetime, will prove to be a big impetus for the sector. Additionally, the general exemption of income tax up to INR 5 lac that will benefit 3 crore tax payers is likely to increase the demand for affordable and mid-income housing segments. Also, the strong signal of rationalization of GST in the near future also augers well for the sector. With these measures bearing fruit in the medium to longer term, we foresee a rise in housing demand in 2019.

Extremely positive for the affordable housing sector

Rohit Poddar, Poddar Housing and Development Ltd

This is a positive feel good budget which was expected given the 2019 Elections. It is extremely positive for the affordable housing sector and reinforced the Governments continuing the commitment to this important sector. Enhancing the ease of living and consolidating the real estate sector will further provide people with a comprehensive social security and strengthen the government’s vision to make India a 10 trillion $ economy.