Potential homebuyers were glued to their television screens when the interim budget 2019 was announced by Piyush Goyal in early February. The expectations were on a high as the budget was speculated to provide an all-out boost to the nascent recovery of real estate industry. Experts at Modi Builders analyze the budget decisions and break it down to provide a clear picture of the sector’s future.

In broader terms, interim budget 2019 has favored the Indian real estate with multiple norms that are meant to provide impetus to sales. Simultaneously, builders have been subjected to tax relaxations on established projects as well as unsold units. Let’s take an intricate look to understand the idea of restructuring the demand-supply curve:

Small taxpayers celebrate

Tax Deduction at Source (TDS) limit for tax deduction on rent gets an increase of Rs 60,000 I.e. from Rs 1,80,000 to Rs 2,40,000. With this, small taxpayers can breathe a sigh of relief as it will exclude a fair number of people. Along with that, industry experts at Modi Builders suggest that this step may lead to an increase in the sales of affordable housing units.

Income Tax Act, Section 54

According to Section 54 of the Income Tax Act, rollover benefit can be availed only once by a home owner. Targeting this, the government has suggested to increase rollover of capital gains up to Rs 2 crore, provided that the beneficiary have a second unit apart from their current one. This will encourage people to buy multiple homes and put a dent in the number of unsold units.

Taxation policy on multiple houses

Targeting the middle class people and identifying their financial struggles, it has been offered that the second owned property of any individual be exempted from notional rent tax. Market experts at Modi Builders said that not only will this contribute to the savings of target audience, it will attract investors and people to buy new homes considering the change. However, in case of three houses, the owner will have to pay the amounted tax on the third unit.

Unsold inventory and builders

It has also been suggested that the time period of unsold inventory be increased from the current one year to two years (from the date of project completion). This move, if implemented, will help the realty developers by restoring, and increasing, the demand. Currently, there are more than 7 lakh units unsold across the country.

What was not covered in this budget?

While the aforementioned reforms are expected to create a substantial impact on real estate, some expectations did not meet reality. For instance, a stressed fund was on the cards so that they can help the builders tackle unfinished projects. Some of these projects have units that have been sold, but not constructed. In addition, GST reduction of property purchase did not come through, similar to the NBFC deadlock.

All that said, the General Elections 2019 will decide the fate of Indian Real Estate and if this budget plan is implemented, it might just be the much awaited boost needed to set the Indian real estate industry back on track.