Impact of budget 2020 on Real Estate - Key Hits & Misses

Union budget 2020-2021 has conjured varied reactions from the real estate division - with the push for affordable housing and infrastructure, along with the promotion for rental housing, being lauded. However, the builders and developers are aggrieved that the budget failed to address long-standing expectations, regarding industry status for the sector. Let’s have a look at the impact of budget 2020 on real estate – including key hits and misses...

Budget 2020 Real Estate - Key Hits & Misses

Keys hits Of 2020 Real Estate Budget

Affordable housing

Continuing with the aim of affordable housing under Pradhan Mantri Awas Yojana (PMAY), the center proposed to construct 1.95 crore affordable homes under phase-2 of the flagship scheme between 2019 and 2022. These houses will come equipped with all facilities such as toilets, gas connection, electricity, etc. Additionally, the date of approval of the tax holiday provided to developers of affordable housing would also be extended by a year. This would encourage more and more developers to venture into affordable housing as a luxury segment.

Interest subsidy increment for homes priced up to Rs 45 Lakh

The government announced an additional tax deduction of up to 1.5 lakh for interest paid on home loans borrowed till March 2020 for the purchase of an affordable house valued up to Rs 45 lakh. Through this, a person buying an affordable house will now enjoy an enhanced tax benefit of Rs 3.5 lakh during their 15 year-long loan tenure, taking the net gain to Rs 7 lakh.

Model tenancy law

The Union budget has proposed a “model tenancy law” which will define the relationship between the lessor and lessee. The move will give a push to rental housing in the country by safeguarding the interest of both tenants and landlord communities.

Push to infrastructure funding

The FM disclosed the funding for the National Infrastructure Pipeline (NIP) in fine print, which consists of the infrastructure investment of Rs 103 lakh crore, for completing about 6,500 projects. Mainly to restructure the National Highways Programme and enhance railway infrastructure for better connectivity through various schemes such as industrial corridors, Dedicated Freight Corridor (DFC), Bharatmala, Sagarmala, and UDAN.

The decision will certainly boost the real estate sector and help in generating greater employment opportunities.

New income tax slab

The FM introduced new income tax slabs, reducing the tax rate for an individual income of up to Rs 15 lakh per annum, provided that the taxpayer does not opt for the exemptions or deductions under the previous tax regime of FY 2019-20.

2020 Real Estate Budget - Misses 

No industry status

There was no announcement of the ‘industry’ status for real estate, as this much-awaited expectation remained unaddressed. Like previous Union Budgets, the expectancy remained unmet this year, too. Giving 'industry' status to the sector would have helped builders to apply for loans at a lower interest rate, cutting the cost of construction of projects, boosting housing sales across the country.

No single window clearance

Gaining acceptance for real estate projects was expected to get easier with the introduction of the single window clearance system. But the key demand was once again ignored as the budget failed to address this issue.

Affordable homes value limit unchanged

Another big presumption from this budget was the distension of the affordable homes value limit but it remains unchanged at the Rs 45 lakh level.

No restructuring of loans

The industry anticipated a one-time restructuring of housing loans with a moratorium on principal and interest of two years. However, the Union budget gave this issue a miss.

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