Budget 2020: Key Highlights for Real Estate

India, the fifth largest economy in the world, is also the fastest growing trillion-dollar economy in the world. In the Union Budget announcement for the F.Y. 2020-21, the Finance Minister, Nirmala Sitharaman envisioned India to be a five trillion dollar economy in the coming years and will be powered by technology.

The FM’s theme for the F.Y. 2020-21 is aspirational India, economic development and caring society. The Union Budget envisions India to be one of the most preferred destinations for education in the world. Expansion of educational facilities demands infrastructural development, which in turn urges the growth of the realty sector. All of these factors are interdependent.

On February, 1st, 2020, some key announcements were made that will impact the realty sector and its other dependent/interdependent factors. Let us take a look at these factors. As per a report by the Economic Times, the key highlights of the Union Budget are as follows:

For Affordable Housing

• Rs 1.5 lakh additional deduction on interest rate to be extended by a year for affordable housing loans to incentivize the sector
• Tax holiday for developers of affordable housing to be extended by a year

Concession to real estate transactions

• Currently, while taxing income from capital gains, dismissed profits and other sources in respect of transactions in real estate, if the consideration value is less than the circle rate by more than 5 percent, the difference is counted as income both in the hands of the purchaser and the seller
• In order to minimize hardships in the real estate transactions, and provide relief to the sector, the limit will be increased from 5 percent to 10 percent

Dhruv Agarwala, CEO of Housing.com, Proptiger.com, and Makaan.com said that this move can possibly make the transactions process of real estate seamless where the market rates are 5 to 10 percent below the circle rates as reported by the Financial Express.

Infrastructure

• National Infrastructure Pipeline of Rs 103 lakh crores introduced on 31st December, 2019
• National Infrastructure Pipeline would be used for construction of over 6,500 projects across different sectors
• These new projects include housing, safe drinking water, access to clean and affordable energy, healthcare for all, world-class education institutions, modern railway stations, airports, bus terminals, metros, railway transportations, logistics and warehousing, irrigation projects, etc.
• These projects will be classified according to their size and stage of development
• Rs 100 lakh crores to be invested on infrastructure in the next 5 years

Rs 1.7 lakh crores will be given for transport infrastructure in 2021 which will accelerate the development of highways and in turn boost the realty sector. The infrastructural development will include the following:

• 2500 km of access control highways
• 9000 km of economic corridors
• 2000 km of coastal and land port roads
• 2000 km of strategic highways
• Delhi-Mumbai expressway and two other packages will be completed by 2023
• Construction of Chennai-Bengaluru expressway would also be started

Other Highlights

• 5 new smart cities will be developed by the Central and the State government in the coming years
• 100 more airports to be built by 2024 under the UDAAN scheme
• The FM proposed to monetize at least 12 lots of highway bundles of over 6000 km before 2024
• Rs 22,000 crores to power and renewable energy sector for the year 2020-2021

The neighbouring areas of new airports and smart cities will demand development of residential and commercial spaces. This will include housing apartments, row houses, co-living space, co-working space, office space, supermarkets, retail stores, shopping and dining centres, healthcare centres, recreation zones, etc.

As reported by Telegraph, Abhilash Pillai, Partner, Cyril Amarchand Mangaldas said, “More govt warehouses on govt land is a welcome step. It should be developed with state of the art facility under the PPP model and should have unhindered access. This will help in increasing production and sales. FCI & WCI can also lease out excess space available to private operators.

More hospitals, educational institutions, and manufacturing facilities are expected to boost up the demand in the real estate and construction sector.

Info on the land bank can be easily collated and made available if land titling legislation can be implemented across the country with the help of AI and digital governance. Technologically advanced States should be asked to help other States in implementing this.

Incentives should be given to the States who are proactive in setting up an e-land bank. This will also help in completing the development of Smart Cities, PMAY – Urban & Rural.”