Impact of Budget 2020 on Indian Real Estate Sector
Indian realty sector had a very high expectation from the Union Budget 2020-21, and it looks like that the Finance minister has delivered on some fronts while apparently skipping the other aspects that were anticipated. Yet, one must be reasonable enough with respect to the present economic situation and compulsions of the government alongside the fact that the government already enforced many proactive moves within the last year for the resurgence of Indian realty sector.
These involved the focus on affordable housing by granting it infrastructure standing and additionally the Pradhan Mantri Awas Yojana (PMAY) interest subsidies for first-time patrons underneath the umbrella of Housing for All by 2022. Further to this, the government has additionally reduced GST rates on the under-construction property to 5% and affordable housing units saw GST rates returning right down to only 1% and Ready-to-move-in properties don’t attract any GST at all.
The finance minister has taken some significant steps for the real estate sector in this budget with an intent to fulfill the housing for all mission of the government. In addition to the above mentioned tax relaxation, the government at the same time has introduced an extra tax write-off of Rs. 1.5 lakh on home loans taken for buying affordable housing units priced up to Rs. 45 lakh. This additional write off will be granted over the interest deduction limit of Rs. 2 lakhs on the repayment of interest for home loans. Several other measures were also taken to encourage buyers to invest in their 2nd home in the last budget along with the introduction of an alternate investment fund (AIF) of Rs. 25,000 crores for finishing stalled projects which comes under affordable housing and mid-income category.
This will naturally boost the real estate sector by drawing additional first-time home buyers to the market with the hope of obtaining higher tax deductions. Another positive move has been a tax vacation on the profits earned by real estate developers dealing in the affordable housing sector. This was declared earlier by the finance minister and remained applicable until the 31st of March, 2020. At the same time, she has now proposed an extension of this date by another financial year for the developers dealing in affordable housing. This move will further enhance the confidence of the developers dealing in this fast-growing housing segment. Considering all these aspects, one would undoubtedly think as to what the Indian realty sector has gained from the Union Budget 2020-21.
Another significant announcement made by the government is the development of 5 smart cities through Public-Private-Partnership model. This will also have a positive impact on real estate sector along with the announcement of 100 new airports across the country. Infrastructural growth in Tire-2 & Tire-3 cities will give more chances for the real estate sector to flourish in the near future.