Budget 2019 to uplift the real estate sector

By Bhavini Mishra, Chiya Ahuja

The interim budget focused on the residential segment of the real estate market ahead of the general elections due by May, waiving tax on notional rent, extending tax benefit period for affordable housing and increasing the threshold limit for tax deducted at source (TDS) on rental income.

According to real estate experts, the budget will benefit the affordable housing sector. The real estate industry had been grappling with an all-time low demand. Among the listed companies, major beneficiaries will be Can Fin Homes, Indo star Capital finance, Gruh Finance and Aavas Financiers. None of the listed real estate companies have a meaningful exposure to the affordable housing.

Earlier, a home owner could save the capital gains tax on a sold property by reinvesting the amount into another property. But the guidelines did not allow him to invest the amount into two properties. As per the Union Budget 2019-20 ,benefit of rollover of capital gains under section 54 of the Income Tax Act will be increased from investment in one residential house to two residential houses for a tax payer having capital gains up to 2 crore. This benefit can be availed once in a life time.

In the budget, the government has proposed a number of tax sops that may tempt people to buy a second house. And individuals who own up to two self-occupied properties do not have to pay any tax. Also, the TDS threshold for deduction of tax on rent has been proposed to increase from Rs. 1, 80,000 to Rs. 2, 40,000.

In another move that will likely hot up the affordable home market, acting finance minister Piyush Goyal gave more disposable income to the middle class, raising the tax rebate limit to Rs 5 lakh from Rs 2.5 lakh annual income. In other words, anyone with net taxable income up to Rs 5 lakh will not pay any taxes.

With the intention to ease stress among developers, the interim budget for 2019-20 extended the tax benefit period for players developing affordable housing projects for one more year till March 2020. Also, the budget proposed to extend the period of exemption from notional rent tax on unsold inventories, from one to two years, from the end of the year in which the project is completed.

Inputs from:Economic Times, India Today and vccircle.