The Budget of 2019 and Real Estate Sector of 2019


The union budget of 2019-20 came out and along with it, an array of expectations for the future. The Union Budget 2019 is a very encouraging and favourable budget for real estate industry. First time Finance Minister Nirmala Sitharaman presented her maiden Union Budget for 2019-2020 in the Parliament in the month of July. Every year the Union Budget is awaited with a lot of expectations by all stakeholders. The real estate industry has been going through a rough patch recently because of GST, high property acquisition costs, decline in demand for residential units, high interest rates on loans, liquidity crisis, the absence of a systematic and mature market, flighty developers, corruption etc. Jay Goenka, a reputed real estate company and other seasoned developers along with buyers hope that the 2019-2020 Union Budget will introduce reforms like tax sops and correction in prices which will benefit and stabilise the industry.

According to India Brand Equity Foundation the sector has a lot of potential as it will reach a market size of $1 trillion by 2030 and add a whopping 13% to the country’s growing economy and GDP by 2025. Veterans of real estate sector like Mr. Jay Goenka have also revealed that the real estate sector has benefited immensely with the opening up of FDI which has certainly revived the overall development troposphere. FDI has played a significant role in the development of commercial assets as FDI inflows to the sector in 2017-18 was $1.2 billion and will only move upward in 2019. With RBI now being the regulatory authority for Housing Finance as well, it will lead to easy regulation as all financing sectors would fall under one authority.

Let’s examine the various reforms for the Real Estate sector proposed by the Union Budget:
The most important announcement for the sector is the additional deduction of up to Rs.1.5 lakh on interest of home loans. This step has been taken to boost the affordable housing segment. So, a total deduction of up to Rs.3.5 lakh in taxable income will be provided to home loans seekers up to March 31, 2020 to buy property worth up to Rs.45 lakh. This is a welcome move for middle class and first-time buyers as it will translate into a benefit of around 7 lakhs over their loan period of 15 years.
The additional deduction of Rs.1.5 lakh will be available under these circumstances:

®    If the loan amount is sanctioned by the fiscal organization during the period April, 2019 to March 31, 2020.
®    If the stamp duty worth of the new house does not beat Rs. 45 lakhs.
®    If the new house property is covered in the ‘affordable housing’ category.
®    If the buyer does not already own any residential house property on the date of authorization of the loan.

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