Budget 2020-21: The Budget has proposed to extend the additional Rs 1.5-lakh tax benefit on interest paid on affordable housing loans to March 2021. Besides, it has also proposed to extend by one year the date of approval of affordable housing projects for availing of tax holiday on profits earned by builders.
Another move, which could marginally benefit the industry, is the proposal to change the way in which capital gains on property deals is computed. Currently, while taxing income from capital gains, business profits and other sources in respect of transactions in real estate, if the consideration value is less than the circle rate by more than 5%, the difference is counted as income both in the hands of the purchaser as well as seller. In order to minimise hardship in real estate transaction and provide relief to the sector, the limit of 5% has been increased to 10%.
Credai national president Jaxay Shah said the industry is eagerly waiting for the rental housing policy and the `45-lakh limit to be removed in the definition of affordable housing.
Dhruv Agarwala, group CEO of Housing.com, Makaan.com and Proptiger.com, said the move would make property transactions less burdensome in areas where market rates are 5-10% below circle rates.
However, the real estate industry and analysts have largely termed the Budget disappointing, as it failed to address key issues plaguing the sector, which not only stares at a piling inventory and weak demand, but also fewer avenues to raise capital.
“Marathon Budget 2020 has set a positively direction tone, but failed to announce much-awaited economic stimulus to fuel kick-start of the $5-trillion economy. Labour-intensive real estate sector, which had pegged hope on additional liquidity infusion, tax reforms and rental housing, were overlooked in the Budget,” Naredco president Niranjan Hiranandani said.
JLL India CEO and country head Ramesh Nair said the Budget continues to focus on affordable housing and infrastructure, more specifically, urban infrastructure and logistics. “However, we do not see any significant impact on the realty sector. Keeping in mind the limited fiscal room available to the government, focus of the Budget is to increase liquidity and enhance consumer demand through extension of benefits and simplification of personal income tax,” Nair said.
Anarock Property Consultants chairman Anuj Puri said the Budget misses on quick-fixes the real estate sector urgently needs and focuses more on a long-term vision. “Apart from affordable housing and PIT relief, no major benefits came in for resolving the current housing mess. For instance, a hike in the `2 lakh tax rebate on housing loan interest rates under Section 24 of Income Tax Act could have kick-started healthier demand for housing, especially in affordable and mid-segment categories.”
The Budget also missed any major announcement for easing liquidity in real estate – a major worry for most developers. It also did not announce any measures pertaining to implementation of land reforms, Puri said.
Knight Frank India chairman and MD Shishir Baijal articulated: “Lowering of income tax rates with removal of exemptions may not lead to any meaningful boost to consumption. However, removal of exemptions under the new income tax regime, implying no tax benefit on principal and interest for home loans would be a dampener for the sector…”