Post-Budget 2019 Reactions for Indian Real Estate Sector

On many fronts this is a favourable and bold budget for the real estate industry. Though many of the expectations, whether it is bringing in a structured single-window clearance or granting infrastructure status to the industry didn't materialize, however the government’s stance towards reducing the GST burden on homebuyers is seen as a welcome move.  In its ambitious quest to become a 5 trillion economy in the next five years, the interim budget, viewed as 'Vision 2030', has struck the right chord on several fronts, whether it is building next-gen infrastructure or building stronger digital India.

Steps taken and the impact on the real estate industry, as I see it: 

• The step of making more homes available under affordable housing is in-line with government's vision of ‘housing for all’.
• Giving impetus to the real estate sector, by extending the period of exemption from levy of tax on notional rent, on unsold inventories, from one year to two years, from the end of the year in which the project is completed is a slight relief to the developer community.
• The proposed step to exempt levy of income tax on notional rent on a second self-occupied house is well addressed. 
• Steps which include rollover of capital gains tax on the sale of houses from one to two houses & full tax rebate for individual taxpayers having taxable annual income up to Rs 5 lakhs is definitely a bold move and a great relief to the Indian salaried class. - Mr. Madhusudhan G., Chairman and MD, Sumadhura Group.

“This is a progressive Budget that has the potential to usher the country into a new phase of development and growth. The ‘New India Budget’ as we would like to call it, is expected to boost the real estate sector and keep up the pace of development achieved in 2018. This budget is clearly focussed on both homebuyers and developers with unsold inventory, and addresses some of the key pain points of the sector. For affordable housing projects, the benefit under the provisions of Section 80IB-A (100% deduction on gains from these projects) has been extended for one more year, until 2020.

The tax relief on notional rent from unsold stock has been extended to two years. For buyers, no tax on notional rent on second self-occupied home, no TDS on rental income up to 2.4 lac per year and capital gain exemption under Section 54 of Income Tax Act to be available on two house properties, (up to 2 cr) once in a lifetime, will prove to be a big impetus for the sector. Additionally, the general exemption of income tax up to INR 5 lac that will benefit 3 crore tax payers is likely to increase the demand for affordable and mid-income housing segments. Also, the strong signal of rationalization of GST in the near future also augers well for the sector. With these measures bearing fruit in the medium to longer term, we foresee a rise in housing demand in 2019.” - Mr. Ramesh Nair, CEO and Country Head, JLL India​.

“The real estate sector had sets it sights on the budget to rejuvenate the consumer sentiment in the already ailing sector. We welcome Government’s recommendation to GST council for reduction in the existing rates on housing which will have a positive impact on the housing sales. Further, the tax relief to the middle class will augur well and further spur the demand for mid-segment housing segment that has shown early signs of revival.  

No tax on notional rent on second house and capital tax benefit u/s 54 being increased from investment in one residential house to two residential houses also translates into a good news for the sector as it will have a role in reviving the industry.” - Mr. Amarjit Bakshi, Chairman & Managing Director, Central Park.

“Infrastructure and construction industry received notable sops during the interim budget which also benefits allied sectors like real estate. Significant boost has been given for rural development by sanctioning Rs 19,000 crore for this fiscal, however, allocations and actual pay-outs towards these projects will define the future course. We were hoping for announcements on GST reduction for building material sector and flexible income tax incentives for the affordable housing category, nonetheless, it is time to wait and watch how the GST Council will reduce the burden on home buyers in the coming months.” - Mr. Ashwin Reddy, Managing Director, Aparna Enterprise Limited.

“Union Budget 2019 highlights the far-reaching magnitude of the real estate and infrastructure sectors on India’s overall economic performance. Building the physical and social infrastructure for a 10 trillion dollar economy requires a concerted effort from all parties. 

The announcement with the largest impact on the real sector is the revised income tax slabs that reduce overall tax expenditure. This will enhance the ability of the salaried class to service their loans and therefore invest in real estate and widen the market opportunity for players in the sector. There are also other direct and indirect benefits for the housing sector and in particular the property developers. The notional tax that was payable if a property was unsold for a year has now been extended to two years taking into account the fact that there is an increase in the stock on unsold properties. In addition to that, the deduction under section 54 with regards to capital gains has been amended to give the exemption for two houses as opposed to one house. A notional tax that was levied on the second self-occupied property has been removed and is also a big positive for a middle income person.

While the above announcements in the interim budget coupled with the recent policy reforms are expected to create more stability over the long term, there are aspects which need to be addressed for a strong market revival. Chief amongst these is the reduction of GST on under-construction properties. It was announced that the GST Council will address this in the near future. This decision must be made at the earliest. The lingering possibility of a GST reduction only delays buying decisions and further stalls growth. A clear outcome will boost home buyer confidence and revitalise the sector.” - Mr. Rakesh Reddy, Director, Aparna Constructions and Estates Pvt Ltd.

“While the industry laid down a lot of expectations from the interim budget, for instance, aspects such as according Infrastructure status to the industry, and structured single-window clearance among others, which weren’t met, the budget in its entirety took into account a host of other issues aimed to propel the economy into a 10 trillion dollar economy, which is a positive sign.

The steps taken could percolate into direct & indirect benefits to the housing sector.  The impetus on affordable housing was once again visible.  I believe the proposal to extend Income Tax benefits for affordable housing schemes coupled with doubling NIL Income Tax slab from 2.5 to 5 lakhs will definitely be an impetus to the affordable housing sector. Also, exemption of tax on notional rent, on unsold inventories up to 2 years would provide relief to the Developers on the short term and help focus on newer projects.” - Mr. Sankey Prasad, Chairman and Managing Director, Synergy Property Development Services.