The Finance Minister said the Government was trying to reduce GST burden on homebuyers, but the jury is still out on what the GoM may come up with as its recommendations.
The budget speech by Finance Minister Piyush Goyal has positive news for the common man, which includes no increase in taxes on one hand, and enhanced benefits and reliefs on the other. Effectively, for the tax payer, it promises to bring a smile on his or her face, and this positive sentiment might just enable many a ‘fence sitter’ to morph into a ‘home buyer’.
To my mind, the biggest takeaway from the Finance Minister's budget speech is rationalized taxation, good for both – home buyers as also the real estate developers. While we will need to go through the points in detail, the first reaction is definitely ‘positive’. Having said that, I will wait for the Group of Ministers (GoM) to come up with recommendations to the Goods and Services Tax Council, which will hopefully, bring real estate under GST, while subsuming all other taxes and levies.
The Finance Minister said the government was trying to reduce GST burden on homebuyers, but the jury is still out on what the GoM may come up with as its recommendations.
In his speech, the Finance Minister spoke of the Infrastructure push. This will positively impact real estate, as enhanced connectivity will create new areas where affordable housing projects can be successfully delivered. From the perspective of warehousing and logistics, connectivity enhancements will increase demand for logistics and warehousing spaces.
Among other points that Goyal mentioned, the first to my mind would be extending benefits under Section 80-IBA of the Income Tax Act for one more year. This will enable creation of more homes under affordable housing. This will be applicable to housing projects approved till 31st March, 2020.
Secondly, with the aim of giving impetus to real estate, the Finance Minister has proposed extending the period of exemption from levy of tax on notional rent, on unsold inventories, from one year to two years. This will be applicable from the end of the year in which the project is completed, and this will ensure that the slow-down in creation of fresh stock as a result of the previous situation - where the exemption was only for one year - will be positively impacted.
NAREDCO had submitted a representation, with specific points that would benefit both, home seekers and the industry, it is satisfying that the representation was taken in the right spirit and we see some of those points reflected in the Finance Minister’s Budget Speech.
In my thought process, two things that could have also made it to this positive Budget speech - which were missing as regards the housing sector – granting of industry status to real estate as a sector, not restricting it only to the affordable segment; as also section 43-C of the Income Tax Act, wherein tax is levied when prices are reduced. Also, the NBFC deadlock and stressed asset problems could have been dealt with in terms of solutions in the Budget speech.
To conclude, the one paradigm change in real estate, the new regulatory regime under RERA came in for mention from the Finance Minister. He said RERA has helped in bringing transparency in real estate sector, and I concur. The Finance Minister mentioned in his budget speech that India is poised to become a $5 trillion economy in 5 years and aspires to become a $10 trillion economy in the next 8 years. This will obviously augur well for real estate and we look forward to positives in days to come.The author is the Chairman of the Hiranadani group.