What did Indian Real Estate gain from Budget 2019?
February 7, 2019
The Budget 2019-20 has just come out and those who seem to be benefitting the most are real estate developers and potential home buyers. The interim Finance Minister Piyush Goyal has introduced a number of reforms that may result in a commendable shift in the industry. These reforms include exempting tax limit for home buyers having two properties as well as tax deducted at source (TDS) on house rent. Let’s take a closer look at the interim budget and the impact it will have on the real estate sector and homebuyers.
More money in the hands of buyers
The latest income tax exemption will be a boon for those with an annual income of over 6 lakhs – they will be able to save north of Rs. 28,000. If one household has two earning members, then they’re annual savings will amount to Rs. 56,000. This, in turn, can result in a huge boost for the affordable housing sector. The reason being, loans for affordable housing are usually for 10 lakhs with an EMI of Rs. 10,000. First time home buyers who fall into this tax bracket will be able to buy or invest in a superior home with their higher savings.
Benefits extended to affordable home developers and buyers
Thanks to the Budget 2019, the government has announced there will be an extension of the benefit under Section 80 IBA for another year. The extension means all housing projects will be approved till 31st March 2020. This move is a massive push for developers and homebuyers in the affordable housing segment as it helps achieve India’s Housing for All initiative.
Exemption of tax on notional rent
Investors and homebuyers used to shy away from the thought of buying a second home as the rule was they would be taxed on the notional rent income from their second property. This rule was irrespective of whether or not their property was on rent. However, the Budget 2019 has now proposed that income tax will not be levied on notional rent on a second self-occupied property. This exemption is likely to attract many more investors in the residential sector.
Extension of period of exemption
One of the biggest problems real estate developers faced was unsold inventory and notional rent on the same inventory. If the unsold inventory is at least a year old, notional rent was levied, as was the norm. However, thanks to the Budget 2019, realty players can breathe a sigh of relief as this period has been extended to two years, beginning from the end of the year the project was completed in.
Capital gains benefits
Prior to the current budget, homeowners could save their capital gains on properties sold by reinvesting that amount into another property. However, the budget and tax guidelines did not allow homeowners to invest this amount in two separate properties. But with the release of Budget 2019, the rollover of capitals gains has been increased to two residential properties. This new move comes under Section 54 of the Indian Income Tax Act and applies to taxpayers who have capital gains up to Rs. 2 crores. However, it is important to note that this benefit can be availed only once in a lifetime. Real estate players believe this benefit will create more demand and spark more interest in the Indian real estate industry.
Emphasis on the growth of infrastructure
With the new Budget 2019, the government has also announced that Rs. 19,000 crores will be pushed towards the Sadak Yojna scheme with the aim to fuel the futuristic vision of boosting physical and social infrastructure. The budget also speaks about housing under the Pradhan Mantri Awas Yojna (PMAY) scheme and an increase in development of infrastructure. The positive nod these schemes have received bode well for the future of Indian realty as it will enable more people to invest in or buy homes within the city and in the outskirts as well.
Increased TDS on rental income
The Budget 2019 has also announced that tax on rental income will be increased from the previous limit of Rs 1.8 lakhs to the current amount of Rs 2.4 lakhs. Indian realty players believe this will encourage more investors and homebuyers to look at second homes for rental income.
The Budget 2019 has introduced several new trends that will guarantee a boost for India’s real estate industry. These new benefits are a definite sign for potential homebuyers to invest in Indian realty in 2019. Not only will builders and developers benefit, but homebuyers and investors as well. If the new budget has encouraged you to think about buying or investing in Indian real estate then head over to Casagrand to find your ideal home.