We are thrilled that the Union Budget of 2019 is a budget presented by a woman Finance Minister. As Ms Nirmala Sitharaman stood in all her grace, ready to present the Union Budget, sectors across India waited with bated breaths to gauge the effects of the announcements on their operations and structure. And now, with the noise around this year’s budget dying down, we bring to you the real gist of the humdrum.
Here’s a roundup of the significant announcements made for the real estate sector, that are worth noting-
1.Tax implications for Affordable Housing
Before the budget was announced, Rs 2 lakhs was exempted from the interest paid on housing loans by the investors. FM has suggested an additional amount of Rs 1.5 lakhs to be exempted for buyers investing in affordable housing (houses up to 45 lakhs) and for loans borrowed up to 31st March 2020. Moreover, the profits made by the developers of affordable housing have been declared tax-free.
2.Reformed rental laws
Owing to the fact that the existing rental laws are archaic in nature and do not address the lessor to lessee relationship in a realistic fashion, it has been suggested that a Model Tenancy Law will be created and sent to all the states for such arrangements
3.Encouraging FPI (Foreign Portfolio Investors)/FII (Foreign Institutional Investors)
It was acknowledged that the more innovative financial instruments like REITs, InvlTs, ToTs etc. have seen a reasonable amount of success in recent years and have helped in augmenting the infrastructure investment in India. Hence, it has been proposed that FPIs will be now permitted to invest in these debt securities. Moreover, it has also been proposed to increase the current statutory limit for FPI investment in any company, from the current 24%. Also, any investments made by FIIs and FPIs in debt securities issued by Infrastructure Debt Fund- NBFCs, can be transferred/sold to any domestic investor within the lock-in period.
4.TDS on immovable property-
It has been suggested that the TDS deducted from the payment made for the acquisition of immovable property, the tax shall also be applicable to other charges like club membership fee, car parking fee, maintenance fee or any such charges that are incidental to buying the property.
5.Alignment of affordable housing definitions
Since the definition of affordable housing, in terms of the carpet area, varied from the Income Tax Act to the GST Act; it has been proposed to align the two. To this effect, it has been suggested to increase the limit of carpet area from 30 sq. m. to 60 sq. m. for metros and from 60 sq. m. to 90 sq. m. for non-metro regions. It has also been proposed to limit the cost of the house at Rs 45 lakhs as in the GST Act.
Although, it is too early to say how this budget will affect our industry in the longer run, we do believe that the pending real estate stock is a matter to be taken seriously and that the reforms suggested hereby will only help us work in that direction.