Budget 2020 has come up with several surprises for the real estate sector, as well as the common man. There are several demands slated with the aim to bring about real estate solutions, which the realty sector was expecting to get addressed in the budget 2020. However, the real estate advisory firms in India have confirmed that the little attention to land solutions received from the finance minister will bring in some respite.
Benefit for homebuyers
The respected Finance Minister Nirmala Sitharaman on Saturday proposed to extend the date of availing an additional Rs 1.5 lakh tax deduction on home loan interest by one more year till March 2021 which is a great benefit for consumers aiming to purchase affordable homes
The homebuyers can avail the benefit under section 80EEA. From April 1, the relief will be available for loans sanctioned till March 31, 2021.
Advantage for developers
The finance minister also announced regulation favoring the present condition of builders facing surplus supply and less demand by procuring a tax holiday on affordable housing projects approved till March 2021.
Developers get until March 2021, under section 80IBA, to claim 100% tax deduction for affordable housing projects.
The Union Budget 2020-21 continued the government’s focus on the affordable housing sector, by extending the permitted additional deduction of up to Rs 1.5 lakhs for interest paid on loans borrowed for the purchase of an affordable house valued up to Rs 45 lakhs, by one year, i.e., up to March 31, 2021. Thus, the total tax deduction available on such interest paid stays at Rs 3.5 lakhs for one more year, which is expected to positively impact demand in the affordable housing segment.
New income tax slabs proposed in Budget 2020
The government has proposed a dual tax slab option to the individual taxpayers. The taxpayers can select between the new and the existing tax slab option. The FM has proposed to abolish 70 types of tax exemptions out of 100.
The new tax slab format is as mentioned below:
|Taxable income slab||Existing rate||New rate|
|Rs 0-2.5 lakhs||Exempt||Exempt|
|Rs 2.50-5 lakhs||5%||5%|
|Rs 5-7.5 lakhs||20%||10%|
|Rs 7.5-10 lakhs||20%||15%|
|Rs 10-12.5 lakhs||30%||20%|
|Rs 12.5-15 lakhs||30%||25%|
|Rs 15 lakhs and above||30%||30%|
These amended tax slabs ensure more disposable income in the hands of the middle class. This could lead to reviving the consumption cycle in the realty sector and kick start the economy. Furthermore, the additional savings will motivate individual investors to park funds in the reality sector especially in the affordable housing unit.
Since the government’s proposed eligibility for availing tax holiday on approved projects offering affordable housing projects has been extended for one more year it will be quite beneficial to developers.
Real estate development consulting firms have expected that the tax holiday period from June 1, 2016 to March 31, 2020, which now has been extended by a year will provoke Realty developers to launch more affordable housing projects.
Presently, while taxing income from capital gains, business profits and other sources in respect of transactions in real estate, if the consideration value is less than circle rate by more than 5 percent, the difference is counted as income both in the hands of the purchaser and seller. In order to minimize hardship in real estate transactions and provide relief to the sector, a proposal to increase the limit of 5 percent to 10 percent has been offered by the ministry.
However, the recent liquidity crisis faced by the NBFCs/HFCs in 2019 is still not completely over. The Budget 2020 proposal to further enhance the credit guarantee scheme for NBFCs and HFCs, is expected to bring a balance in the supply-demand ratio.
Thus the consumer and the developer both have marginally gained some respite from the Budget 2020