Nirmala Sitharaman's budget 2019 proposals have given the real estate industry some positive light. It is quite obvious that potential home buyers are the biggest winners on this year's budget with many benefits, such as the tax waiver reform and income tax discounts for the second house. The 2019 Interim Budget was welcomed by all stakeholders in the real estate sector, including home purchasers, homeowners, builders, developers, and bankers.

What Real Estate Gained In Budget 2019?

Wide public infrastructure was constructed across the country on land owned by central ministries and central public sector companies. Public infrastructure and affordable housing have taken up by means of innovative instruments such as joint development and concessions.

In the last five years, new innovative financial instruments have been launched as part of the modernization of assets in the Brownfield Investment strategy, such as the Infrastructure Investment Trusts (IInvITs), Real Estate Investment Trusts (REITs) as well as models such as the Toll-Operate Transfer (ToT). Through brownfield asset monetization, India had reasonable success, and a number of Invites and REIT transactions were completed. In addition, one ToT operation has been carried out by NHAI. These instruments and models provide cumulative resources of over 24,000 crores.

Let's look at some of the key reforms of budget 2019 that have benefited to the real estate sector.

Capital Gains Income

Homebuyers can reinvest their saved income from selling a property in a different building before the interim budget 2019. Capital gains cannot be used for two separate properties according to the previous tax guidelines. However, the implementation of the Union Budget 2019-20 has revised these guidelines. Investors can now purchase two different residential houses in Hyderabad using their capital gains. This scheme is subject to Section 54 of the Income Tax Act and is profitable to all taxpayers with capital gains up to two crores. Everyone has to remember that this benefit can only be used once in a lifetime. This reform can certainly have an impact on India's real estate.

Notional Rent Tax Exemption

Many real estate developers and homebuyers are unwilling to make a second purchase, primarily due to the rental tax paid from their second home. The rule applied whether or not the residential property was leased. But the 2019 interim budget repealed this policy by exempting from a secondary self-occupied property tax on notional rent. This will result in an increase in the number of second-time buyers for the Indian real estate market.

Enhanced Advantages of Affordable Housing

The extension Income Tax by one year under Section 80 IBA is an outstanding highlight of Budget 2019. The extension will, therefore, support all housing projects approved by 31 March 2020. For homebuyers seeking affordable home options, this represents a great advantage. The government's housing for all initiatives will receive great success by boosting the affordable housing sector in turn.

Revised TDS Rental Limit

The Indian Government revised the rental income limit applicable to the TDS deduction in the recent Union Budget. The TDS tax was applicable, in accordance with the previous law, to all tenants, including the employees who earn up to 1 lakhs of rental income. However, only if your rental income exceeds 2.4 lakhs will the TDS tax apply after the roll-out of the Union Budget 2019.

Assistance for Developers

The unsold properties and notional rent from these inventories are one of the greatest challenges facing property developers. If the residential unit was already unsold a year later, then they had to be paid with notional rent. The Union budget has extended the time to two years, starting with the end of the completion year, as a big relief for real estate developers. The notional rent is now available for properties over two years older.

Income Tax Deduction Up To 5 Lakhs of Annual Income

The government has proposed a tax waiver for workers who have Rs. 5 lakhs annual income. If you have invested in some tax saving schemes in compliance with Section 80(C), you will have a tax-free cap of Rs 6.5 lakhs per year. This is one of the main reforms which benefit home buyers and the real estate industry greatly. The home buyers who fall within this tax bracket may, therefore, increase their savings and invest in affordable property.

Boost on Infrastructure Development

The allocation of Rs 19,000 crores to Sadak Yojana to improve India's physical and social infrastructure will be a further striking highlight of this Interim Budget. The budget also highlighted Prime Minister Awas Yojna's affordable housing plan. Both these measures are key to implementing accessible and affordable real estate. Therefore, these initiatives would allow more people either in cities or in the outskirts to buy their dream home.

The Indian real estate sector is rising in the right direction, with so many tax advantages and improvements in the affordable housing sector. "Now is the best time for real estate investment that will give you better returns for the future if you are a first time home buyer or are looking forward to a second purchase.

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By: Shailaja K