Budget 2019 And Its Impact On Real Estate
The 2019 budget has been welcomed by all stakeholders of the real estate sector. From home buyers and homeowners to bankers, builders and developers, this budget has brought benefits for everyone. Here are some of them:
Buying a House is Now More Affordable
Most people need a loan to buy a house. The budget increased the interest deduction from Rs 2 lakhs to Rs 3.5 lakhs on loans taken till the end of the financial year 2019-2020. This is applicable for all loans taken for houses valued at up to Rs 45 lakhs. According to a senior director of Colliers International India, Aashish Agarwal, “This is expected to drive sales and bring fence-sitters back into the market, within this financial year.”
Funding Becomes Easier
The budget announced several measures to bring the non-banking financial companies (NBFCs) back from the ongoing liquidity crunch and debt crisis. A one-time, six-month credit guarantee for buying pooled assets worth up to Rs 1 lakh crores. This will help revive lending and bring back a sustained capital flow for NBFCs that are performing well. FPIs and FIIs have also been allowed to make investments in a NBFC’s debt papers to boost their liquidity.
Good infrastructure drives up the value of construction projects. In this year’s budget, the government announced its commitment to boosting infrastructure. The Finance Minister spoke about improving metro connectivity, suburban railway networks and roads as well as creating a good water management system. She also spoke of investing Rs 100 lakh crores for this over the next 5 years.
Push for Buying Second Homes
The government has also extended the benefit of capital gains rollover from investment in one residential house to investments in two residential houses as well as certain conditions are met. This benefit can be availed once and applies to taxpayers with capital gains up to Rs. 2 crores.
Until now, if a person owned two homes, it was compulsory to include notional rent for the second house while calculating annual income. This held true regardless of whether the house was rented, used by the owner, their parents or children or kept locked. This year’s budget has announced a change. Income tax will no longer be levied on notion rent of second homes.
This will make it easier for Indians to maintain two homes and will encourage them to invest in second homes.
Builders get Breather for Incomplete Projects
The Finance Minister announced a plan to extend the Section 80-IBA Income Tax benefits for an additional year. This applies to all ongoing housing projects that will be registered by March 31, 2020, under the Real Estate Regulatory Act. According to the chairman of Supertech, R.K. Arora, “The move would bring a much-needed breather for some projects which have struggled to complete for various reasons.” This will also boost the affordable housing segment.
By increasing the basic exemption limit to Rs. 5 lakh and standard deductions, the budget has also increased the disposable income available to the middle class. This will encourage new investments in the real estate sector and help developers find buyers.