Reaction on Union Budget 2020-21 II Real Estate Sector

In the 2020 budget the government has decided to help the common man by reducing the income tax burden on individuals. By doing this, the government will definitely help boost consumer sentiment which will give a big fillip to consumption. This was the need of the hour to boost a flagging economy. Supported by a low interest rate regime, these tax savings will also encourage buyers to invest in real estate, which has traditionally been the favorite asset class in India but has been struggling in the recent past. Considering that the Budget has also extended the additional Rs 1.5 lakh tax benefit on interest paid on affordable housing loans to March 2021, buyers have now have more reasons to invest in property.

However, it is yet to be seen as to what deductions would be available to taxpayers under the new regime since the new tax rates are optional and may involve letting go of deductions available to taxpayers under the ongoing regime.

Liquidity starved developers would greatly benefit from the government move to extend by one year the date of approval of affordable housing projects for availing of tax holiday on profits earned.  Real estate will indirectly get a further boost with improved infrastructure as the government plans to invest Rs 1.7 lakh crore on infrastructure.

Extension of additional tax deduction of Rs 1.5 lac on affordable housing worth upto Rs 45 lac by one year is a step in right direction. Similarly, extension of capital gains on affordable housing by one year is also a welcome step. Also, Government’s increased focus on infrastructure sector and connecting  Mumbai-Delhi corridor is the need of the hour, which Hon’ble Finance Minister has tried to address. This will benefit peripheral towns like Sohna (near Gurugram) immensely.

Simplifying the tax slab is a good move by the Govt. and the tax savings to each individual would encourage spending and help spur the economy. Infrastructure push provided in the budget will also help the development in the country. A big announcement is the government confirming to complete the Delhi – Mumbai industrial corridor by 2023 which is one of the biggest infrastructure projects and this once ready will make Indian industry globally competitive. Govt. has pressed all the right buttons to push start the economy.

The budget announcements made by Hon’ble FM seems to be mixed bag from real estate perspective. While,  simplification of income tax regime with reduced rates and no exemptions, extension of measures announced for affordable housing by one more year are some of the positives for the sector.

At the same time, long pending demand of the real estate sector has not been met. We have been asking for industry status for the whole sector and single window clearance for smooth functioning, the government did not comment on these requirements.

Most important aspect of the budget is that it has respected the entrepreneurs by giving them one time amnesty and immunity from penalty and prosecution for settling all ongoing income tax cases provided you pay by 31-3-2020 or latest by 30-6-2020 with some additional charge

Provision of doing away with criminal provisions under corporate law will create business friendly environment. Further Tax Payer Charter  as announced will be another great step to create faith in working in the country.

Extension and continuity of sanction and launch limitation from March 2020 to 21 for availing tax free exemption  for developers of affordable housing projects is another welcome step together with 1.5 lac exemption to the affordable home buyers.

Creation of 5 new Smart manufacturing cities on Economic Corridor in PPP mode with state governments will boost employment and economic growth, It is likely to have far reaching growth impact on the economy.

Liquidity and availability of finance is the biggest issue confronting the real sector today. In this context, the assurance given by Hon’ble Finance Minister that NBFCs and HFCs will not face any liquidity crunch will help calm the nerves for sure.  Simplification of tax structure and continuation of some measures announced for affordable housing in the last budget are some other positives. Meanwhile, the government’s proposal for 5 new smart cities in collaboration with states via PPP model is a great move to leverage not just the funding potential of private players but also their experience of making cities livable and sustainable. We hope to participate as and when the details are out.

Government’s announcement of Rs 100 lakh crore for infrastructural development will boost real estate in tier II and tier III cities. There were many measures that we would have loved the government to address but announcement of infrastructure development is the step in right direction. Apart from that impetus of the government on boosting the MSME and SMEs will create employment in these cities leading to the increased demand.

Budget was very disappointing for the real estate sector, it has not addressed any pending issues that the sector has been struggling with. The FM did not touch upon the liquidity issue, banks not extending loans to real estate, neither any relief has been announced for restructuring of loans. The sector is already struggling and many representations have been given, we were expecting some major reforms considering the economic situation which country is facing and especially real estate.

Reducing tax rates and removing exemptions were advocated for long. Hon’ble FM has attempted to do the same. Yet, the older regime has also been continued and tax payers has the option of choosing between the two.Continuation of some of the older norms related to affordable housing announced last year has been extended by one more year, which is perhaps a right step.However, considering the overall health of the real estate sector, it would have helped if Government would have given little more incentive to both home buyers and developers

We are happy that the focus of the government is the overall development of the economy. Budget has touched upon the aspects that are going to boost the GDP including infrastructure spend, rural economy, income tax relief, Rs. 4,400 crore allocated for cities to ensure clean air, and tax holiday on loan sanction for affordable housing. We are confident that these steps will improve the sales figure as people are getting a complete package from the government as they will good and infrastructure which will improve their lifestyle. Developers and buyers will benefit from the extension of withholding tax, which will mean that in some cases a property can be sold at rates lower than the circle rate prevalent in the area.

Real estate sector was expecting Single Window clearance and industry status. These two demands are very important for the smooth functioning of the sector as a whole. However, there many announcements in the Budget that are going to help the real estate sector to grow. Focus on infrastructure and economic growth in this budget will lead to more activity at the commercial segment as the demand for offices will grow.

We were expecting that government will at least streamline the bank loans to the developers, but no such announcement was made by the FM. It was important for the FM to address the issues as the sector is struggling with the finances and timely completion of projects. There were no new announcements regarding real estate and we are left to wait for the next announcement by the government for the sector that contributes immensely to the GDP.

Many fence sitting buyers are expected to take a call on real estate investment as the Budget has extended additional Rs 1.5 lakh tax benefit on interest paid on affordable housing loans to March 2021. This extension should have been provided for non-affordable housing segment also as housing prices in metros are high. However, not much was announced for the commercial segment directly.  We feel that the economic measures that government has taken  for the overall health of the economy will have a bearing on commercial segment. The Delhi-Mumbai Corridor announcement will also see development of commercial spaces along with residential.

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 rate lesser than the circle rate. This happens when there is a slowdown in the market and as a urgency measure someone sells it at lower price, the transaction in these cases used to become questionable on the pretext that the rest of amount has been paid in cash. However, real estate will also gain from the tax relief that people have got, which means that the buyers 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.

One of major welcome steps in this Budget was that earlier any taxing income from capital gains in respect of transactions in Real Estate if the consideration value is less than the circle rate by more than 5% the difference was counted as income, both in the hands of purchaser and seller. Increasing the limit to 10% now will definitely minimize hardship in the sector and provide relief for both the developer and buyers. Also extending the date of approval of affordable housing projects for availing tax holiday on profit earned by developers extended by 1 year will encourage more and more developers to build affordable housing projects across the country, and contributes towards Prime Ministers Housing for All 2022 mission. And while we appreciate the government extending additional Rs 1.5 lakh tax benefit on interest paid on affordable housing loans to March 2021, we still feel that this incentive should also be provided to non-affordable housing segment where by millions of middle class buyers, especially living in the metros like Delhi, Mumbai and Bangalore, can take plunge, since here the cost of even a 2 bedroom apartment can cost up to ₹1 crore and above. Lastly we welcome the overall emphasis on the infrastructure across the country with Rs100 lakh crore dedicated for infrastructure in next 5 years along with special thrust for infrastructure focused skills is truly an appreciable approach, especially the Project Preparation Facility for preparation of infrastructure projects, actively involving young engineers and management graduates as this will only increase the pool of skilled Infrastructure professionals in the future, and make them job worthy for the coming challenges.

On the similar lines of last year’s budget, this year also the government has focused on boosting the affordable housing. Extending the time span to another one year for additional tax deduction of Rs 1.5 lacs on affordable housing worth upto Rs 45 lacs is a step in right direction. Apart from that in this year’s budget the government has also reduced the income tax slabs. With more money in hand the buyers will have more reasons to invest in property and realize their dream of owning a house.

But, being a developer we had certain long standing demands including industry status to the real estate, single window clearance and reduced GST on building material, to which we look forward to being fulfilled in the coming times.

In Union Budget Finance Minister Nirmala Sitharaman announced the healthcare, agriculture and infrastructure sectors outlined in this budget by giving some tax benefits to individuals by lowering tax rates amid simplification, incurring higher capital expenditure and yet containing fiscal deficit at 3.8% is commendable. Considering that the Budget has also extended the additional Rs 1.5 lakh tax benefit on interest paid on affordable housing  Real estate will indirectly get a further boost with improved infrastructure as the government plans to invest Rs 1.7 lakh crore on infrastructure. The Government’s continued focus on affordable housing and continuation of earlier measures along with the announcement of building 5 new smart cities under PPP also bodes well for the sector.

The Union Budget 2020-2021 has predominantly focussed on revitalizing the rural economy which is a good move. As per last year measures surrounding “affordable Housing” was the mainstay from the perspective of the real estate industry. Extension of additional tax deduction of Rs 1.5 lac on affordable housing worth up to Rs 45 lac by one year is a step in the right direction. However, considering the overall health of the real estate sector, it would have helped if the Government would have given little more incentive to both home buyers and developers.

The major announcement government has decided to make of Rs 100 lakh crore for infrastructural development that will support real estate in small cities like tier I and Tier II. We also welcome the thurst on the infrastructure sector outlined in this budget. Considering the Budget has also extended the additional Rs 1.5 lakh tax benefit on interest paid on affordable housing loans to March 2021, buyers have now had more reasons to invest in property. However, there has been a silence in the budget on stimulating mainstream real estate demand. The sector grappling with the reforms – driven new order has been bereft of any meaningful interventions that could have been achieved through the budget.

Directly real estate did not get anything from this budget except for the announcement of ease in tax for Real Estate Transactions from 5% limit presently to 10% and Date of approval of affordable housing projects for availing tax holiday on profit earned by developers extended by 1 year. We were expecting that the government will look into the long pending demands of the sector and address the liquidity issues being faced by developers. The best announcement would have been to guide the banks to start extending loans to the real estate developers. Having said that there are many economic announcement that will lead to increased demand of residential as well as commercial projects. We hope that in the months to come there will be announcements to enhance ease of doing business for the developers.

In the 2020 budget, the government has primarily trying to help the common man by reducing the income tax burden. Among the expectation is reintroducing the subvention scheme, especially for affordable homes as also the one time roll over/restructuring in case of stressed assets, the extension of additional tax deduction of Rs 1.5 lac on affordable housing worth up to Rs 45 lac by one year is a step in right direction. The Government’s increased focus on the infrastructure sector and connecting the Mumbai-Delhi corridor is the need of the hour, which Hon’ble Finance Minister has tried to address.

There were hopes in the Budget for real estate as some of the announcements by the government will increase the demand of housing and commercial. Some of the steps that will help the demand are Income tax relief, ease in tax for Real Estate Transactions from 5% limit presently to 10%, and focus on infrastructure. However, demand has to be met with the supply and there the developers needed measures that can help them in developing the projects on time such as help in loans from banks, single window clearance, ITC benefit, etc. These topics were not touched upon by the FM and we expect that the government will take care of these soon.