India's real estate sector has been under pressure in recent times. Big realtors getting bankrupt, project delays, cash crunch, NBFC liquidity crisis and finally the consumers pulling out of any major investments were many reasons which hampered the growth of real estate. The interim budget presented by the acting Finance Minister, Piyush Goyal earlier this week was entirely from a populist eye on the middle class and farmers.
Budget 2019 has provided increased tax exemptions to the middle-class home buyers with the aim to encourage them to invest in real estate. It also seeks to ease the financial burden of the real estate developers as well to increase the overall sentiment in the sector. One of the major decision taken in the real estate sector was the extending exemption for inventory tax on builders from one to two years.
Till the announcement, the unsold inventory more than one-year-old was considered stock-in-trade and the builder were forced to pay notional rent on those units as per the law. The extension of one provides huge relief on the builders with the fact that there are more than over 6.3 lakh inventory across the top seven cities in Indian cities which was a huge fiscal burden on developers.
Moreover, the government has also decided to extend the section 80-IAB, which allowed for a 100 per cent deduction on profits generated by the developer of affordable housing project till March 2020. The announcement is likely to relieve the pressure in the affordable residential housing sector.
Finance ministers announced a slew of exemptions for the consumers, the budget extended the period of exemption from levy of tax on notional rent on a second self-occupied house. The existing law, called for income tax on notional rent if a consumer has more than one self-occupied house. The budget also announced no tax-deducted at source (TDS) on house rents up to Rs 2.4 lakh from the previous limit of Rs 1.8 lakh.
However, there were a few areas where the government did not make an announcement. No provisions were made to clear the deadlock in the non-banking financial corporation(NBFC) segment which continues to hamper the growth. The GST council had promised relief on the GST burden for the homebuyers but there were no such announcements in the budget.