The Indian real estate had a bag full of expectations from Union Budget 2020-21, but FM Nirmala Sitharaman released only a handful of goodies from her bahi-khata for the sector. However, this Union Budget for homebuyers brought some relief. If you are an investor, then you must know what did the Indian real estate gain from the Union Budget 2020.
While understanding the market scenario, buyers’ sentiments and the tabled budget, Mr. Amit Raheja, CMD, Wealth Clinic shared his views, “Though real estate has not got anything directly from this Budget but there are announcements that will indirectly help the sector. The direct benefit will come from the affordable housing tax holiday which has been extended to March 2021 and extension of withholding tax. By extending withholding tax, the developers and buyers will benefit if a developer sells his product at a rate lesser than the circle rate. This happens when there is a slowdown in the market and as an urgency measure someone sells it at a lower price, the transaction in these cases used to become questionable on the pretext that the rest of the amount has been paid in cash. However, real estate will also gain from the tax relief that people have got, which means that the buyer will have more disposable income at hand leading up to more decisions to buy property. Then we have measures taken by the government to boost rural economy and improve infrastructure that will indirectly lead to real estate development.”
Major Support for Affordable Housing
An additional deduction of Rs. 1.5 lakhs for the interest paid on home loan availed to buy an affordable home has been extended for a year and this is a reason to cheer for the home buyers. This announcement in Union budget 2020-21 is going to boost realty business, as more buyers are estimated to approach the property market for buying residential property under the affordable housing segment in the coming financial year.
Earlier to this, the same deduction was offered under Section 80EEA on a home loan up to Rs. 45 lakhs till March 2020. But now, the homebuyers are eligible for the same deduction till March 2021. This is one of the positive moves taken in the second union budget under the regime of PM Narendra Modi.
Increase in Tax Holiday for Developers
To balance the demand for affordable housing, Union FinMin Nirmala Sitharaman announced, tax holiday on the profit generated by the developers on the affordable housing projects that are sanctioned till March 2020. The Union Finance Minister also laid a proposal to extend the date of approval for affordable housing projects to avail this tax holiday by one year. This is going to boost the confidence of realtors by manifolds.
This tax holiday on affordable housing projects is available under Section 80IBA.
Concession on Real Estate Transactions
The Union Budget 2020 also considered the issue of capital gains. While applying the provision to tax, the gap between capital gains or income from other sources is less than the stamp duty value by 5%, then this will be said as income for the property buyer and the seller. Thus, the proposal is tabled in the house to increase this limit from 5% to 10%, as the real estate transactions will be carried out in a transparent manner.
Limit Amendment for Debt Recovery under NBFCs
Union FM Nirmala Sitharaman proposed to limit various NBFCs [Non-Banking Financial Companies] for debt recovery under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 from Rs. 500 crores assets to Rs. 100 crores or loan amounting from Rs. 1 crore to Rs. 50 lakhs.
Infrastructure, Power & Energy
While tabling the Union Budget 2020, FM Nirmala Sitharaman announced that the country will have 100 new airports by 2025. She informed the house about allocating Rs. 1.7 lakh crores for transport infrastructure in the new financial year that will begin from 01st April 2020 and will conclude on 31st March 2021.
Similarly, the Finance Minister also proposed an expenditure of Rs. 22,000 crores on various power and renewable energy projects in the financial year 2020-21. She also announced the expansion of the natural gas pipeline from 16,000 kms to 27,000 Kms.
All this is going to positively impact the Indian real estate as the homebuyers prefer to buy a residential property that offers seamless connectivity to airport and highway. Along with this, the home buyers focus on buying housing units enabled with clean gas supply and solar panels.
New Tax Slabs for Individuals
The new tax slabs are an option for the individual taxpayers if they don’t wish to follow the old tax slabs. The Narendra Modi-led Union Government has given the taxpayers a chance to avail tax rebates either under the new provision or according to the older version whichever suits the person as per his/her annual income and investments. So, here are the new tax slabs as announced in the Union Budget 2020-21:
|Annual Income (Rs.)||Tax Slab|
|Upto Rs. 2.5 Lakh||Nil|
|From Rs. 2,50,001 – Rs. 5,00,000||5%|
|From Rs. 5,00,001 – Rs. 7,50,001||10%|
|From Rs. 7,50,001 – Rs. 10,00,000||15%|
|From Rs. 10,00,001 – Rs. 12,50,000||20%|
|From Rs. 12,50,001 – Rs. 15,00,000||25%|
|Above Rs. 15,00,001||30%|
*Cess and Surcharge remains unchanged in the new financial year.
The Union Budget 2020 has tried to boost the confidence of home buyers, investors and realtors on a whole by offering various rebates and relaxations. The proposed infrastructure projects will also help in the revival of the realty market. But, the no-move attitude on issues like industry status to Indian real estate, one-time disbursal of loan and structuring of Alternate Investment Funds can pull off the property business from the track.