Budget 2019: Real Estate Industry Outlook


Budget 2019 has brought good news for almost everyone

Anand Vilayannur, Tattva Mittal Group

The Budget 2019 has brought good news for almost everyone. A lot was expected from this budget and most of it has been covered. While representing the Budget 2019 Piyush Goyal mentioned in the beginning that RERA and Benami Transaction Act 1900 are helping to bring transparency in the sector. Total number of 1.53 cr houses have been built under PMAY scheme which shows that the sector has fared well in providing homes for the middle and lower class along with the govt. The Budget has proposed to provide the benefit of rolling over capital gains if the investment is made in not just one, but two residential houses. This benefit would be offered for an amount of upto Rs 2 crore which is a once in a lifetime benefit for any individual. With the recent GST meeting announcement and the newly announced budget we truly hope the year sees a positive uptick for the real estate sector.

The No tax on Notional rent on second self-occupied home takes of some load from home buyers. The threshold limit for TDS on rental income has been increased to Rs 2.4 lakh from Rs 1.8 lakh currently, as home owners with rental income have something to cheer about. Income Tax relief on notional rent from unsold houses extended upto 2 years which brings some relief. For individuals with gross income upto 5 lakh get Income Tax rebate, is surely a great step. Even the standard deduction increased from 40,000 to 50,000 should be impactful for middle-class section. Looking in minor details the budget will bring most daily use item now under 0-5% tax slab under GST. The increase in Tax free Gratuity from 10 Lakh to 20 Lakh will indeed become a major relaxation for the middle class.

As per the budget speech, last 5 years have witnessed a wave of next gen structural reforms, we are today the 6th largest economy in the world besides generating high growth rate we contained double digit inflation and resorted fiscal balance by the end of 2018. Infrastructure wise India is fastest highway developer in the world with 27kms of highway built each day which is surely proud news for us. By 2030 India will lead the energy revolution in the world with the electric vehicles as mentioned by Piyush Goyal during the budget in one of the 10 dimensions to be focused by the govt. This new India will only drive on electric vehicles but also would not have to import oil and will produce electricity on our own domestically. With all the challenges set to achieved in place India is poised to become reach $5 Trillion economy in the next 5 years, it looks like the government has already laid the foundation for the coming decade. The country now looks forward for the most interesting and awaited Elections this year.

Budget 2019 will address the housing needs of millions

Chintan Sheth, Ashwin Sheth Group

The Interim Union Budget 2019-20 has struck the right chord in line with its vision to boost the nation’s economy and address the housing needs of millions. The decision to further streamline tax procedures and introduce electronic tax filing will lead to greater transparency. This will allow citizens to conduct businesses in a fair manner, alleviate financial frauds, and attract institutional funding from domestic and foreign investors thus boosting the nation’s GDP. As for the housing sector, making requisite amendments in the tax structure by providing full tax rebate for income up to INR 5 lakhs, the middle-class income tax payer will have a better purchasing power and be able to buy homes of their choice. Moreover, provisions for income tax exemptions on notional rent on unsold houses will provide relief to the realty market and boost investor sentiment. The government has also taken a step in the right direction by focusing on physical infrastructure development in terms of airports and seaports, railways and roads which will catalyze the growth of the residential and commercial sector around these projects. However, clarity on single window clearance and GST was much anticipated. We also expected incentives for first time home buyers which would have helped increase demand and create equilibrium in the demand-supply gap. While this budget focuses on the overall growth of the economy, we will adopt a wait and watch approach and hope adequate measures are taken to complement their continuous endeavors to boost the real estate sector.

Budget has provided significant boost for rural development

Ashwin Reddy, 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.

Largest impact on the real sector is the revised income tax slabs

Rakesh Reddy, 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.

Impetus to Affordable Housing

Sankey Prasad, Synergy Property Development Services

While the industry laid down a lot of expectations from the interim budget, for instance, aspects such as according Infrastructure status to the industry, and structured single-window clearance among others, which weren’t met, the budget in its entirety took into account a host of other issues aimed to propel the economy into a 10 trillion dollar economy, which is a positive sign.

The steps taken could percolate into direct & indirect benefits to the housing sector. The impetus on affordable housing was once again visible. I believe the proposal to extend Income Tax benefits for affordable housing schemes coupled with doubling NIL Income Tax slab from 2.5 to 5 lakhs will definitely be an impetus to the affordable housing sector. Also, exemption of tax on notional rent, on unsold inventories up to 2 years would provide relief to the Developers on the short term and help focus on newer projects.