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For the real estate sector, finance minister Nirmala Sitharaman proposed to extend the Rs 1.5 lakh interest benefit on affordable housing loans by a year to March 2021.
The 2020 Union budget presented on Saturday has focused on long-term vision rather than giving out quick fixes, real estate industry players told CNBC-TV18.
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For the real estate sector, finance minister Nirmala Sitharaman proposed to extend the Rs 1.5 lakh interest benefit on affordable housing loans by a year to March 2021. At present, the deduction applies only to loans sanctioned on or before March 2020, for the purchase of affordable homes.
“It will significantly benefit first-time home buyers who will enjoy the benefits of interest subvention under the CLSS
Further, the finance minister also extended the tax holiday she doled out to these developers in July 2019 by another year. The budget proposed to extend the time to claim 100 percent tax deduction on profits from affordable housing projects until March 2021.
At present, developers can avail a tax holiday on profits earned on the construction of affordable housing projects approved by March 31, 2020.
“The extension of benefit for affordable housing for the developers as well as home buyers by one year is a step in the right direction. As far as the funding constraint for the real estate sector is concerned, the government spoke about enhancing the partial credit guarantee scheme for NBFCs, which again may not suffice for the ailing real estate sector,” said Knight Frank.
The tax benefits extended to both home buyers and developers in the affordable housing sector will encourage more launches in the segment, feels Niranjan Hiranandani, president, NAREDCO.
Hakim Lakdawala, group promoter, Goodwill Developers, said: “The new tax regime and extension of the date to sanction housing loans by a year will ensure surplus funds in the hands of potential home-buyers, acting as a positive tool in recuperating consumer confidence and prompt investments.”
Meanwhile, commenting on the budget, Ashok Mohanani, chairman EKTA World and vice-president, NAREDCO Maharashtra said that the budget sentiment was positive and the funding had been spread across other sectors keeping a balance of inflation of the country.
Sitharaman also said that real estate circle rate limits would be increased from 5 percent to 10 percent for the purpose of taxation — a move that is seen as a small consolation for developers contending with an extremely sluggish housing market.
“The announcements bring glad tidings, as advancements in infrastructure are a trigger for the development of society. The real estate sector can expect an array of opportunities to explore different projects - both residential and commercial, and the tax benefits being offered on the Affordable Housing initiative are a positive indication of the year to follow,” noted Rahul Grover-CEO, SECCPL.
However, some industry players felt that the budget lacked a major benefit or announcement with respect to easing liquidity in the sector.
“Apart from the affordable housing push and personal tax relief, no major benefits came in for resolving the current housing mess. Also, the Budget missed any major announcement for easing liquidity in the real estate sector – a major worry for most developers. The Budget also did not announce any measures pertaining to the implementation of land reforms,” said Anuj Puri, chairman, ANAROCK Property Consultants.
The budget misses on the ‘quick fixes’ the real estate sector needs urgently and focuses more on a long-term vision, Puri added.
Voicing similar views, Hiranandani said that the budget has set a positive direction tone but failed to announce much-awaited economic stimulus to kick start a charge towards $5 trillion economy.
“With the economy in doldrums and acute slump in consumption, efforts on demand creation incentives went missing. The labour intensive real estate sector which had pegged hope on additional liquidity infusion, tax reforms, subvention schemes, debt restructuring and rental housing were overlooked in the budget. Any fiscal measure in sluggish real estate sector could have provided a fillip,” Hiranandani added.