As Finance Minister Nirmala Sitharaman presented Budget 2020-21, a mixed wave was seen in the real estate sector. Some real estate developers and property consultants expressed disappointment saying that the budget once again failed to address the mounting problem of liquidity crisis in the realty segment while a few welcomed the government’s decisions to extend the tax benefit to boost demand and supply of affordable housing.
There are three major aspects where Budget 2020-21 touched upon the real estate segment:
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Circle Rate:
The FM proposed to increase the real estate circle rate limit to 10% from 5% for purposes of tax “in order to minimize hardship in real estate transaction and provide relief to the sector.”
In simpler words, any purchaser acquiring any real estate at a price which is 90 per cent or higher of its stamp duty value should not be subject to any additional tax based on deeming fiction.
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Fund Allocation:
Budget 2020-21 saw the Housing and Urban Affairs Ministry outlay touch Rs 50,039.90 crore, which is a nearly 18.39 percent increase from the revised estimate of Rs 42,266.72 crore from the last budget.
While the outlay for the flagship scheme of the government, Pradhan Mantri Awas Yojana, has been granted Rs 27,500 which is nearly an 8.5 percent increase. Smart Cities Mission and AMRUT got Rs 13,750 crore for 2020-2021 against Rs 9,842 crore in 2019-2020, which is about 40 percent more than the amount set aside last year.
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Tax holiday for one more year:
The FM extended Rs 1.5-lakh benefit on interest paid on affordable housing loans by a year to March 2021. The budget also gave tax holiday for another year to affordable housing developers.
At present, home loan interest payment of up to Rs 2 lakh is allowed as deduction across segments, along with loan principal repayment up to Rs 1.5 lakh. The move is expected to boost demand from first-time homebuyers.
Apart from these measures, the real estate segment remained more or less ignored by the government. The segment has been eagerly waiting for the rental housing policy, one time roll over of developers’ loan and the 45 lakh limit to be removed in affordable housing definition for a while now. The segment is facing a liquidity crisis since 2017 and it was anticipated that Budget 2020-21 will bring in some respite.
Industry Reaction On Budget 2020-21
This is what real estate sector leaders have to say about Budget 2020-21.
NAREDCO President Niranjan Hiranandani: “The liquidity issue which is a major challenge for the economy in general and real estate in particular, here too one does not see any major relief.”
Satish Magar, President, CREDAI National: “As an industry, we expected bolder steps from the government to revive the ailing sector such as providing more liquidity for the sector, onetime restructuring of loans, and tax deductions on home loans to give impetus to buyer sentiment.”
Shishir Baijal, Chairman & Managing Director, Knight Frank India: “As far as the real estate sector is concerned, the industry was hoping that the Government would come up with measures to boost housing demand. However, the removal of exemptions under the new income tax regime, implying no tax benefit on principal and interest for home loans would be a dampener for the sector.”
Anarock Chairman Anuj Puri: “Apart from the affordable housing push and personal tax relief, no major benefits came in for resolving the current housing mess.”
Ankush Kaul, President – Sales & Marketing – Ambience Group: “Government’s focus is on the development of a stable and positive business environment in the country. Its commitment to the development of sustainable infrastructure, housing and boost investments across sectors will help the country in the longer term. The proposed investment and allocation of funds under the National Infrastructure Pipeline will help in the development of cities and real estate destinations across the country.”
Dhruv Agarwala, Group CEO, PropTiger and Housing.com: “In the 2020 budget the government has decided to help the common man by reducing the income tax burden on individuals. By doing this, the government will definitely help boost consumer sentiment which will give a big fillip to consumption.”