Key takeaways for the Real Estate sector from Union Budget, 2020
Finance Minister Nirmala Sitharaman presented the Union Budget on February 1 this year, which was the second budget presented by the current government after receiving a historic mandate to rule the country for a second term in 2019. The financial document for this year focused on three prominent themes: Aspirational India, with spotlight on agriculture, wellness, water and sanitation, education and skills; economic development encompassing the industry, infrastructure and the new economy; and the establishment of a caring society with focus on women and children, on culture and tourism and preserving the environment and climate change. It further sought to bring these three themes under governance and the financial sector, aimed at the ease of living.
An important take away from this year’s budget was the simplification in the Income-tax regime, which sought to significantly reduce the tax slabs for individual taxpayers who forgo certain deductions and exemptions. Under the new slab, it was announced that an individual would be required to pay taxes at reduced rates, while those with earnings up to Rs 5 lakh would not pay any tax.
On another front, the Budget put thrust on the acceleration of infrastructure development in the country, for which, it announced the launch of projects worth Rs 100 lakh crore over the next 5 years, which would consists of more than 6,500 projects across sectors like housing, safe drinking water, access to clean and affordable energy, universal healthcare, world-class educational institutes, modern railway stations, airports, bus terminals, metro and railways, among others.
The government also announced its move to abolish the Dividend Distribution Tax, which is a great endeavor, especially from the perspective of corporate India. Moreover, tax benefits have also been announced for power generating companies along the lines of new manufacturing companies and Corporate Tax has been brought down to 15 percent, which will support industrialization and help in the generation to meet future demand.
For the real estate sector, in order to further incentivize affordable housing, the government has extended the date of loan sanction for availing the additional deduction of Rs 1.5 lakh for interest paid on loans taken for purchase of affordable homes by one year. Moreover, with a view to enhance the supply of affordable houses in the country, a tax holiday on profits earned by developers of affordable housing project has also been extended by another year. Other measures related to the real estate sector include the government’s announcement of the safe harbor of 10 percent for computation of income in respect of transaction of immovable property where the consideration is less than the circle rate, measures to encourage unlisted Real Estate Investment Trust (REITs), announcement of 5 New Smart Cities and the proposal to open Data Centre parks, which are encouraging steps and would give a shove to commercial real estate development in the times to come.
However, in the final analysis, it appears disappointing that several of the real estate sector’s long-standing demands like granting of industry status, one time roll over, tax on unsold inventory, tax to individual investor for notional income on second or third home, RERA as single body for customer grievances, among many other demands have not been addressed in this year’s budget.