Budget 2019: A Significant Lift for the Real Estate Sector

On Friday, Feb 1, 2019, Union Finance Minister Piyush Goyal presented the much-awaited interim budget 2019 in Lok Sabha. All the Indian people and industries were eagerly anticipating the benefits from the 2019 budget. According to some economists, the union budget 2019-20 is far more effective than all previous budgets. This year's budget focuses more on providing relief to farmers rather than putting them in distress. The budget proposal is likely to give an additional amount to farmers having land up to 2 hectares. Conversely, Finance Minister Piyush Goyal has introduced tax exemptions benefiting middle-class individuals, as well as the real estate and infrastructure sectors.. The significant relaxation in taxable policies on real estate is expected to attract investments even from middle-class individuals.
Here are some gains for middle-class people and real estate developers from the interim budget 2019:

1. Tax-Free Gains on Two Properties Worth Up to Rs 2 Crore
The advantages of rollover of capital gain are to be increased from investment in one residential property to that in two residential properties for a taxpayer having accumulated capital gain up to Rs 2 crores. If a person buys and sells 3 properties, then he/she is liable to pay capital gains tax on the profits gained from selling the 3rd property. In this scenario, an owner can enjoy the full profit from selling 2 properties. However, this advantage is available only a single time in a person's life.. This policy has definitely filled every property owner with the urge to direct more investment towards the real estate industry. Therefore, real estate developers can reap the indirect advantages of capital gain.

2. Two-Year Tax Relief for Unsold Properties
No tax will be payable by any real estate developers for holding unsold property up to 2 years from the end of the year in which the project is completed. The announcement of this policy has thrilled every real estate developer. As real estate developers get an extra year to sell the property with the right marketing strategies, a 2-year tax relaxation can prove to be enough for a customer to book a flat.

3. Tax Exemption on Rent for Small Taxpayers
The proposed increase for the TDS deduction on rent raises the threshold from Rs 1,80,000 to Rs 2,40,000. With this policy, small taxpayers can enjoy the rent amount up to Rs 2,40,000 without having to pay any tax on rent. This policy can attract small investors to buy properties where the TDS on rent lies lower than Rs 2,40,000 annually. Hence, this measure provides much-needed respite to small-scale taxpayers. Now, one single person can possess two properties without having to pay notional tax on the 2nd property which is not let out. In this case, the owner, having 2 properties, does not bear the burden of putting the 2nd property on rent just to avoid tax.

4. Fund Allocation for Infrastructure Projects (Road, Railway, Metro)
Finance Minister Piyush Goyal has expanded the budget allocation for infrastructure projects encompassing railways, highways, and urban transit systems. The interim budget has even promoted a plan for rural areas named as "Pradhan Mantri Gram Sadak Yojana" which is being allocated Rs 19,000 crores in 2019-20 as against Rs 15,500 crores in 2018-19.

5. Tax Exemption for Individuals Earning 7 Lakh in Case of Additional Investment
Prior to the 2019 budget, any income exceeding Rs 2,50,000 was subject to taxation, marking the sole criterion placing a salaried individual within the taxable bracket. But with the new tax policy of the government, a salaried person, with total income up to Rs 7 lakh, will not have to pay taxes if one uses a proper investment strategy with a limit of Rs 1.5 lakh along with Rs 50,000 under standard deduction. It means if a taxpayer, with a salary of Rs 7 lakh, makes an investment in the provident fund and prescribed equities, then he/she will not pay tax on the income. On the other hand, an individual salaried person, with a salary of Rs 5 lakh doesn’t need to pay tax. Such policies will induce people from the middle-class section to hunt for investment opportunities either in the stock market or real estate.

With the proposal to tax capital gains last year and reduce capital gains from real estate this year, there are indications to pull Indian households back to property-buying.