Union Budget 2019 generous to ailing realty sector

Government offers several incentives to boost demand for real estate amidst sales slowdown, liquidity crisis.

Published: 09th July 2019 11:21 AM  |   Last Updated: 09th July 2019 11:21 AM   |  A+A-


For representational purposes

By Express News Service

While sticking to fiscal prudence, finance minister Nirmala Sitharaman has been both generous and bold with her Union Budget proposals for the ailing realty sector, which is reeling under low sales, liquidity tightening and record lows in consumer confidence.

The Budget allowed overall deduction of up to Rs 3,50,000 on interest paid on home loans up to March 31, 2020 for houses with price tags up to Rs 45 lakh, sticking to its intent to promote affordable housing sales.

This move is expected to translate into a benefit of around Rs 7 lakh to middle-class homebuyers over a loan period of 15 years.

ALSO READ: Can realty sector beat five-year slowdown?

To align the definition of affordable housing in the Income-Tax Act with GST Act, the finance minister proposed to increase the carpet area limit for classification as affordable housing from 30 square meters to 60 square meters in metropolitan regions and from 60 to 90 square meters in non-metropolitan regions.

Many steps were taken to address the liquidity crisis, such as by giving support to NBFCs and shifting regulatory power over housing finance companies from the National Housing Bank (NHB) to the Reserve Bank of India (RBI).

As for fast-tracking the implementation of the ‘Housing for All’ mission, the Finance Minister also announced a tax holiday on profits earned by developers of affordable housing.

Another major move was reducing the holding period for calculating long-term gains on immovable property from 36 months to 24 months, shifting the base year to calculate long-term gains from immovable property to 2001 from 1981.

A safe harbour of 5 per cent on stamp duty value was also provided for the purpose of computation of capital gains on immovable property.

Indications that the government is moving toward much-needed reform in rental housing is also welcome, with the finance minister acknowledging that current rental laws are “archaic as they do not address the relationship between the lessor and the lessee realistically and fairly”.

The Budget went on to announce that a Model Tenancy Law will be finalised and circulated to the states soon.

ALSO READ: Relief from the liquidity crisis on top of realty sector’s wishlist for the Union Budget

The industry admits that this would give a boost to new areas of growth for the sector.

“We also welcome the move to bring in Model Tenancy Law as it has the potential to spawn the growth of new segments such as rental housing, student housing, senior living, etc,” said Nagaraju Routhu, chief executive officer, Hero Realty.

But, can all these steps help sector? Major metros like Mumbai, Delhi, Bangalore, etc. have noticed only a marginal increase in prices of residential sales, ranging between 5 per cent and 7 per cent.

Experts claim that the government alone cannot be responsible and that developers have to be more transparent and efficient to sustain businesses in the long run.

Despite all the turbulence, credible developers who deliver products on time and meet regulatory requirements have benefited.

“Consumers are now looking for developers with excellent track records in terms of quality and execution,” PropEquity founder and MD Samir Jasuja said.

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