With a lot of expectations ballooning for real estate budget 2020, finally, on February 1st, Finance Minister Nirmala Sitharaman has introduced the much-awaited budget 2020-21 with the new personal income-tax optional scheme,  multi-billion-dollar agriculture, infrastructure, and health plans to revive development in these sectors. She said, "this budget would raise people's income and purchasing power in the form of capability growth and empower the deprived segments while shielding wealth creators."

But, what about the Indian real estate sector, which is expecting some significant changes? Let's deep dive on the highlights of what Indian real estate gained from the budget 2020,

Helping Hand Extended for Affordable Housing 

As per the previous budget 2019, Nirmala Sithraman declared that govt would deduce up to 1.5 Lakh from interest paid on loans for the purchase of affordable houses. Under this scheme, the deduction was granted for the house loans that were sanctioned on or before March 31st, 2020. On February 1st, in the newly released real estate budget 2020, she increased the loan approval period by a further one year, i.e., up to March 31st, 2021, to ensure that more people make use of this additional deduction and to promote affordable housing further.

The Union budget 2020 also gave affordable housing developers an extra year's tax holiday. Initially, a tax break was given for the income earned by developers of an affordable housing project approved by March 31st, 2020, to increase the supply of affordable houses in the region. The Finance Minister raised the tax clearance deadline for the use of affordable housing projects also by March 2021. For the houses valued up to Rs 45 Lakhs, the total tax deduction stayed at Rs 3.5 Lakhs the same as the previous year.

Revised NBFCs Limits for Debt Recovery

During the release of Budget 2020, finance Minister Nirmala Sitharaman proposed reducing the NBFC's threshold for eligibility of debt recovery to address the distressed non-bank finance corporations (NBFCs). The Center has also revised the NBFC debt recovery provisions in compliance with the 2002 SARFAESI Act. Now, the limit has been lowered from Rs 500 Crore to Rs 100 Crore asset size or loan size from the existing Rs 1 Crore to Rs 50 Lakh.

The drop in the cap would now improve the security benefits of the lower sized ticket loans for Non-Banking Financial Corporations' debt recovery. This will also enhance the capacity of the NBFC's debt recovery to recover smaller loans and improve the financial health of its lower-value assets. It is said that NBFCs will now be a part of the Trade Receivables Discounting System  (TReDS) and can contribute to economic and financial sustainability.

Long-Term Capital Gain Tax Stayed but Exceptions Granted for Real Estate Transactions 

To boost investors to re-enter the market, the real estate budget 2020 unveiled the increase of the circle rate from 5% to 10%. Until now, if the consideration value exceeds by more than 5% the guideline or circle rate, the difference is regarded as income for both buyer and seller when calculating capital gains or corporate gains taxes relating to property transactions. But, as per the new release to attract more stakeholders, amendments have been made. 

Most market players anticipated the lowering or zeroing of the LTCG tax, but finance Minister Nirmala Sitharaman, in her second budget, has retained the tax on long-term capital gains on equity funds. The long-term capital gain tax was re-introduced in 2018 by back then FM Arun Jaitley. But due to recent slowdown across real estate industries, everyone hoped for the relaxation in LTCG tax laws but were despaired by the budget 2020 outcomes.

Booster Packages for Infrastructure & Concession for Cooperative Tax rates

To facilitate new infrastructure and create more employment, in the upcoming five years, the govt is expected to spend upto Rs 100 lakh crore on infrastructure. On December 31st, 2019, Nirmala Sithraman granted Rs 103 Crore for National Infrastructure Pipeline to promote more infrastructural development. The new project list includes more than 6500 projects covering the following sectors: accommodation, safe drinking water, access to clean and sustainable electricity, healthcare for the general public, international educational facilities, and new train stations.

In our economy, cooperative societies play a vital role in enabling their members to access credit, obtain inputs, and market products. At present, these are charged at a rate of 30% including the surcharge. As a big compromise in the real estate budget 2020, FM has agreed to allow cooperative firms to be taxed at 22% plus a surcharge of 10% and 4% without exemptions so as to bring a balance between cooperatives and businesses. 

Revised Personal Income Tax Rates Rises as the Mother of All in Budget 2020

Sitharaman proposed a new and more straightforward personal income tax structure that will significantly lower income tax rates for the individual taxpayers who have not taken on certain deductions and exemptions. These new rules are expected to provide substantial flexibility for taxpayers and simplify the income tax law.

As per the new regime, an individual will be taxed as per the revised tax rates,

Under the new tax structure, a taxpayer can earn substantial tax incentives according to his exemptions and deductions. For taxpayers, the new tax regime is optional. A person currently using deductions and exemptions in compliance with the Income Tax Act may choose to use them under various sections of Chapter- VI-A of the Income Tax Act and continue to pay tax under the old system.

In-Brief

Clearly, budget 2020 for real estate didn't live up to many expectations, but one can't say it has completely overlooked it. Many expected the allowance of interest on housing loans would rise from Rs 2 lakh, and there would be a turnaround for the stressed real estate developers. Although there were some of the disappointments, considering the uprising constraints, we can say Nirmala Sitharaman's budget 2020 was packed with a decent number of packages.

Regardless of any beneficial proposals for real estate in budget 2020, the Hyderabad market has always been the best for investments. Browse PropertyAdviser.in top find all properties for sale in Hyderabad and trending real estate news for a well-informed, smart investment decision making.

By Govi