Interim Budget Offers Relief to Middle Class, Real Estate Sector
The Interim Budget announced for FY 2019-20 has brought a lot of joy and hope to numerous sections of the country, especially the middle class. From a real estate perspective some of the budget announcements are beneficial and will boost recent growth. Here we list down some of them:
- Household disposable income has received a boost, thanks to the full tax rebate on individual annual income up to Rs. 5 lakh. Salaried standard deduction has been raised further to Rs. 50,000 from the earlier Rs 40,000. This increased savings is expected to increase confidence to invest in properties.
- Tax on notional rent from second self-occupied property has been waived off. This is a big boost to those who own second homes as well as those who have been seeking to do so. As a result, this will serve to boost demand for second homes as families grow bigger.
- The TDS threshold on rental income has been raised from Rs. 1.8 lakh to 2.4 lakh. This comes as a big incentive to many who are looking to invest in homes for investment purposes and earn rental income.
- 1.53 crore houses were constructed under Pradhan Mantri Awas Yojana (PMAY) in last 5 years. The Interim Budget continues to push for more affordable homes with extension of benefits under Sec 80(i)BA for one more year, for all housing projects approved till end of 2019-2020. This should serve to expand this asset class even further and make it more attractive to more buyers as well as developers.
- GST has been the biggest Indian tax reform since independence. The government continues to remain focused on simplifying GST. It aims to reduce the tax burden on homebuyers and the GST council will take necessary steps to do so.
- Tax to be levied after 2 years from date of completion of a project allows developers more time to sell unsold inventory. This is a much required structural reform which will ease the operations of developers and reduce the incidence of tax.
- Government is focused on boosting Ease of Living. It aims to build next-gen physical as well as social infrastructure for a $10 trillion economy. This will boost quality of living in Indian cities and towns.
The Interim budget has continued the thrust on improving and enhancing infrastructure, the backbone of any developing country. This includes outlays for railways, roads, etc. to boost the connectivity across the country, especially to connect tier 2 and 3 towns to the big cities.
Overall, this is an expansionary budget which is aimed at increasing the disposable incomes of individuals and households. It also provides a blueprint for an expanding and prospering economy with provisions for sustainable and equitable growth.
Some of the announcements will potentially propel demand for homes and bring back domestic consumption and investment in the Indian real estate sector. This is a much needed prospect for this sector which is looking to build on the recovery and consolidation of 2018-2019.
What do you think of the Interim budget?