Budget boost offers some hope for realty
Real estate may expect better days in the future as the government is willing to go the extra mile to boost demand in the sector, as evident by Finance Minister Nirmala Sitharaman’s Budget Speech. The finance minister has not only proposed to modify tax slabs in order to offer lower tax rates to the salaried class, but she has also decided to extend the additional rebate on home loan interest for purchase of affordable housing by another year.
These two policy decisions could result in the real estate sector seeing some improvement. However, to gauge the real impact of the new tax rates, we would need more clarity about the exemptions taxpayers will have to abandon.
Also laudable is the government move to extend the tax holiday for developers of affordable housing projects by another year, a move that comes as major relief for slowdown-hit builders. The Economic Survey has estimated that builders in India’s 8 prime residential markets were sitting on unsold stock worth Rs 7.77 lakh crore. The two above-mentioned Budget proposals could be useful in lessening the inventory burden on the developer community, especially in the affordable housing segment.
Banks have not been able to pass on the benefits of interest rate cuts to consumers. Thus, the difference between the repo rate and the average consumer lending rates is quite wide.
Banks must play their part to revive consumption. Considering that the repo rate is at a record low as it is, we expect better co-operation from the financial sector.
Buyers and sellers of real estate would find transacting more beneficial now as the Budget proposes a change in the manner capital gains on property transactions are computed. So far, if the consideration value of a property is less than the government-specified circle rates by more than five per cent, the differential is counted as income both in the hands of the purchaser and the seller, and taxed accordingly. The Budget proposes to increase this limit to 10 per cent.
The Budget 2020, however, has failed to meet a long-standing demand of the developer community to give industry status to the real estate sector.
The builder community had also been expecting a reduction in the GST to get some relief at a time when muted sales and liquidity crunch are posing major challenges but that was not to be.