Budget 2019: Expectations of real estate sector
With the upcoming General Elections and current predicament of Indian politics, it will not be a surprise if the 2019 budget is the last one formulated by the Narendra Modi government. Concentrating on the premier economy contributors, real estate is one of the major sectors in need of a series of policy changes. Following are the series of changes expected with the modifications made by GST, RERA, and demonetization:
The primary concern of potential homebuyers is the current interest rate on home loans. Focusing on the unsold inventory of real estate and need of the middle class people, the deduction on loan interest figures under Section 24 is on the cards. In addition, revision of home loans under GST is expected so as to make residential real estate more affordable for the target audience. This highlights the increase in tax deduction limit from Rs 2 lakh to Rs 5 lakh.
First-time homebuyers are hoping for the formation of a stressed asset fund in order to tackle the prolonged issue of incomplete projects. Along with this, some benefits for the same class is expected from the revision of Section 80EE. GST slabs applicable to real estate sector are speculated to be revised to promote the industry and provide impetus to the market recovery. Though the collective impact of GST, income tax, stamp duty, and capital gains tax has hampered the investment aspect of real estate, it can be improved with increased fundamental deductions for new buyers.
With the ‘Housing for all initiative by 2022’ launched by the government under Section 80C, the revision of principal repayment limit from Rs 1.5 lakh is subject to increase. This will have a direct impact on the improvement of affordable housing sector. According to the Pradhan Mantri Aawas Yojana, a financial assistance of $28 billion is required from the government.
Under construction projects
Highlighting the tax on under construction projects, 12% GST with 5% to 8% stamp duty is currently applicable. Experts at Modi Builders suggest that reduction to 5% GST with no tax on affordable housing schemes is the best possible, and applicable, change. Furthermore, upcoming types of real estate projects like minor industry spaces, co-working spaces, co-living spaces, etc, can receive some dedicated benefits. This will increase the influx of investments from corporate giants.
Though the aforementioned expectations have been resonating in the market, it will be interesting to see what the Modi government can offer in the final budget before elections and its corresponding impact on elections.