Budget 2019: Hits and misses for realty
Tax benefits and incentives for affordable housing could help sector in the long run, but clarity on GST and a solution to the NBFC liquidity crunch are crucial too, say experts.real estate Updated: Feb 09, 2019 19:46 IST
The interim budget announced on Februrary 1 has been hailed by developers and realty experts for the good news it brought to the real-estate segment. This includes the increased exemption period for notional tax on unoccupied houses (from a year to two years); no tax on house rents up to Rs 2.4 lakh; rollover of capital gains tax on the sale of a second house; and 100% profit exemption to developers of affordable housing for a year, for projects approved before March 31, 2020.
Some players feel there should have been more sops on GST, the liquidity crisis, stamp duty and the pending issue of industry status for the real-estate segment.
Some of the good news comes from announcements not directly relating to real-estate. Such as the revised exemption for people earning up to Rs 5 lakh a year.
“This increases the disposable income. And with this, buyers will have an improved affordability for house purchase,” says Shishir Baijal, chairman of realty consultancy Knight Frank India. “The tax exemption on unoccupied houses and the capital gains relief on a second house will help ease purchasing decisions for people living away from their hometowns too, or those considering a weekend getaway or vacation home.”
- No tax on house rents up to Rs 2.4 lakh
- 100% profit exemption to the affordable housing projects that are approved by March 31, 2020
- Unsold inventory will be taxed as per notional rental income only after the completion of two years
- Long-term capital gains from the sale of up to two houses can now be invested to ease tax liability
Similarly, the push given to infrastructure through increased expenditure on airports and railways indirectly benefits the real-estate sector. “This is, of course, subject to implementation,” says Anuj Puri, chairman of Anarock realty consultants. “In a direct positive, it will increase demand for logistics and warehousing.”
In terms of directly beneficial announcements, the tax exemption on profits for developers of affordable housing projects is an important measure for the recovery of the residential real-estate sector, adds Anshuman Magazine, chairman for South East Asia, the Middle East and Africa, at CBRE.
“This is a boost to the Housing for All scheme too,” adds Kamal Khetan, managing director of Sunteck Realty. “This could lead developers to launch more projects in this under-served segment.”
Even a little GST reduction on under-construction properties, and clarity on input-output credit, could have been a big boost for the industry, says Parth Mehta, MD of Paradigm Realty.
The government seems to have forgotten the one booming segment of the realty industry — co-working spaces. Some measures could have been taken to bolster this sector, especially in the planned smart cites, says Manas Mehrotra, chairman of Incubex NestaVera, a co-working space based in Bengaluru.
While the government announced that India is the second largest start-up hub in the world, there were no announcements for the start-up ecosystem. “Co-working firms were expecting that the Budget this year would curb or altogether eliminate the Angel tax [levied on sums invested in companies by angel or independent investors]. The Angel tax hurts the start-up ecosystem and indirectly the co-working segment. Angel funding is currently considered income and taxed at the full rate of 30%.”
The interim budget was more or less a crowd-pleasing exercise, says Puri.
“No announcements were made with regards to clearing the NBFC deadlock. There were promises of reduction on GST burden on homebuyers,” he adds, “but no announcement of actual relief.”
First Published: Feb 09, 2019 19:46 IST