Real Estate: Proposals Could Have Been Bolder
The government could have been much bolder with respect to real estate but whatever came to the market were majorly in the form of improving buyer sentiments and nothing else.
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The year 2019 was a not a particularly great for the real estate sector, especially the residential market, though commercial or office real estate boomed in 2019 and is likely to further excel in 2020.
India’s office real estate has been soaring on the back of a strong technology sector that continues to hire and thereby fuel demand for quality office space.
The focus of the government is on the overall development of the economy.
The budget has touched upon aspects that are going to boost the GDP including infrastructure spending, rural economy, income tax relief, Rs 4,400-crore allocated for cities to ensure clean air, and tax holiday on loan sanction for affordable housing.
Developers and buyers will benefit from the extension of the withholding tax.
Earlier any taxing income from capital gains and other sources in respect of transactions in Real Estate if the consideration value is less than the circle rate by more than 5 per cent the difference is counted as income, both in the hands of purchaser and seller. This will definitely minimize hardship in the sector and provide relief for both the developer and buyers.
Date of approval of affordable housing projects for availing tax holiday on the profit earned by developers extended by one year. This will encourage more developers to build multiple affordable housing projects across the country since the tax holiday provides a win-win situation for all stakeholders involved and contributes towards Prime Minister Housing for All 2022 mission.
The government also extended additional Rs 1.5 lakh tax benefit on interest paid on affordable housing loans to March 2021, which will make fence-sitting homebuyers in the segment take the plunge, but at the same time we feel that this should be provided to non-affordable housing segment as well to help the millions of middle-class buyers, especially living in the metros like Delhi, Mumbai and Bangalore, where even a two-bedroom apartment can cost up to Rs 1 crore and above.
Also, the government has proposed to develop five new smart cities in the country. While the site locations have not been finalised, the plan is to choose areas that will work out as good economic corridors. Demand will be generated and new jobs will be created.
Overall, a lot of positive things are planned for the real estate industry. However, a number of pressing issues have still gone unnoticed such as the need for better liquidity in the market so that the developers ailing for funds could get relief. There were no direct measures taken for the property market which almost all market players were expecting. The government could have been much bolder with respect to real estate but whatever came to the market were majorly in the form of improving buyer sentiments and nothing else.
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