Budget for a New India
JLL India rates interim Budget 8/10 for the Real Estate Sector
The year 2019 has started on a good note for Indian real estate. Overall, a progressive Budget has been announced for the sector and we expect it to keep up and advance the growth momentum achieved in 2018.
A slew of measures that were announced to further boost the supply of affordable housing in the country, is expected to fuel the investments in the housing sector. These measures are expected to go a long way in achieving the Government’s objective of ‘Housing for All by 2022’.
The Budget gives a big boost to homebuyers in the affordable and mid-income segment. The provision of total tax exemption for individuals having a taxable income up to INR 5 lac will benefit salaried tax payers with liquidity improving to the tune of INR 12,500 annually.
With improved liquidity, demand across the affordable and mid-income housing segment will rise. Standard deduction has increased from INR 40,000 to 50,000 which is expected to further help buyers in the affordable and mid segment. The Interim Finance Minister further added that no tax on notional rent will be levied on second self-occupied property. Further, it was announced that there will be no TDS on rental income up to 2.4 lac per year, and a rollover of capital gains exemption under Sec 54 of the Income Tax Act (with a cap of 2 cr) extended to two properties, will be allowed, once in a lifetime.
Incentivising developers, the Interim Budget announced extension in the approval time by one year to claim 100% tax deduction on profits from affordable housing projects u/s 80-IBA. This extension within the deadline of March 2020 not only ensures continued interest of developers involved in the construction of affordable housing projects but will also attract new companies to this segment. Overall, it will help in achieving the ‘Housing for All’ objective of the government. Exemption of tax on notional rent on unsold stock has been extended from 1 to 2 years. This move will provide elbow room to developers in the housing segment to offload their unsold stock.
Also, the strong signal of rationalization of GST in the near future augurs well for the sector. While these measures make housing an attractive asset class, we foresee a rise in housing demand in 2019.
By Ramesh Nair, CEO and Country Head, JLL India