The Union Budget 2019 would be announced by the government on 1st February 2019 and every industry has its own expectations from this annual budget. The real estate industry is no less. It has some high expectations from this year’s annual budget which would address the problems of high inventory, high input cost, low liquidity, etc., and reform the Indian realty sector. The real estate gurus expect the budget to bring forth new changes in the GST slab, taxation, funding, home loans, rental housing, etc. Expectations are also on increase the purview of infrastructural status from just the affordable housing sector to the normal housing projects as well. With so many expectations in mind, here are the top five expectations that the real estate industry has from the Union Budget 2019.
- Reduced GST Rates: The entire real estate industry is eyeing on the budget 2019 to bring in a cut in the GST slabs for under-construction properties. While projects with the completion certificate are already exempt from paying any type of tax, the property buyers have to pay 12% GST on the purchase of any under-construction property. This is an additional sum to the Stamp Duty and Registration cost they have to pay on property purchase. The industry is expecting the Indian Finance Minister to revise the GST rate and put the under-construction property under a lower tax slab of 5-6%. This would be very critical in ushering a positive move in the real estate sector.
- Income Tax Rebate: The homebuyers, who plan to invest their hard-earned money in real estate India, sometimes get dissuaded by the huge sums they have to pay as taxes. These include GST, capital tax gains, property tax, and more importantly income tax on purchasing the property. It would be a great move by the government to introduce an income tax rebate on the tax paid. This would definitely encourage more property buyers to invest their money in the Indian real estate market.
- Tax-Efficient REIT: Although Real Estate Investment Trust aka REIT has become a trustworthy investment option for those planning to get high returns from real estate investment, this mode has not yet been made tax-efficient by the government. To attract more interest of investors in this investment option, the government should plan measures to make REIT more tax efficient. At present, 35% of the distributions are taxed at an advantaged rate. Those planning to make direct or indirect through foreign direct investment in REITs setup in India are expecting the government to make investment in REITs more tax-efficient and offer higher tax returns.
- Home Loan Tax Benefits: Offering tax deduction on home loan interest is another thing that the real estate investors as well as homebuyers in India are wishing for in the Budget 2019 announcement. While the government has already announced some interesting tax benefits on home loans for those buying homes in the affordable segment, the mid-income, and luxury housing segment also seeks to get some benefits. Moreover, allowing tax deduction on the home loan interest of under-construction property would be a boon for the homebuyer.
- Increased Finance Limit: Another expectation from the budget 2019 is to increase the finance limits on NBFCs. In September 2018, there was an NBFC crisis that affected the real estate industry of India in a very negative manner. Many projects were stalled due to this crisis which led to a decrease in the demand for housing units. Developers and builders in India feel that increasing the finance limit on NBFC would allow them to speed up the construction work and bring back the trust of property buyers in the real estate sector.
These are some of the major expectation that the developers, builders, homebuyers, and the property investors have from the Budget that would be announced on 1st February. While we have some high expectations from this year’s budget, only time will tell what it actually has in store for all the realty players.