The year 2019 has started on a good note for the Indian real estate sector. With some positive announcements, the interim union budget 2019 has not only addressed the pain points of the sector but has attempted to help the buyers in the affordable and mid-income housing segment. With a progressive budget in place and general elections due in April, the government has simply pushed the sector on for further growth in 2019, as it did in previous few years with a series of reforms including the implementation of the Real Estate (Regulation and Development) Act, 2016 (RERA) and Goods and Services Tax (GST).

A slew of measures that were announced to further the affordable housing supply in the country is also expected to fuel the investments in the sector. These measures are therefore expected a long way in achieving the government’s objective of ‘Housing for All by 2022’.

The budget aims to help homebuyers in the affordable and mid-income segment. The provision of a total tax exemption for individuals having a taxable income up to Rs 5 lakh will benefit salaried taxpayers with liquidity improving to the tune of Rs 12,500 annually. With improved liquidity, demand across the affordable and mid-income housing segment will rise.

Standard deduction has increased from Rs 40,000 to 50,000, which is expected to further help buyers in the affordable and mid segment. The interim finance minister further added that no tax on notional rent will be levied on second self-occupied property. Further it was announced that there will be no tax deducted at source (TDS) on rental income up to Rs 2.4 lakh per year, and a rollover of capital gains exemption under Section 54, Income Tax Act (with a cap of Rs 2 crore) extended to two properties, once in a lifetime will be allowed. These measures will help in the growth of the resale housing market in the country.

Incentivising developers and addressing the pain of developers -- large unsold inventory -- the interim budget announced an extension in the approval time by one year to claim 100 percent tax deduction on profits from affordable housing projects u/s 80-IBA. This extension within the deadline of March 2020 not only ensures continued interest of developers involved in the construction of affordable housing projects but will also attract new companies to this segment.

Exemption of tax on notional rent on the unsold stock has been extended from one to two years. This move will provide elbow room to developers in the housing segment to offload their unsold stock. Also, the strong signal of rationalisation of GST in the near future augurs well for the sector.

While these measures make housing an attractive asset class, we foresee a rise in housing demand in 2019. This said, the industry and the government will need to continuously focus on ways to tackle the current conundrum, where projects are stuck due to a liquidity crisis and regulatory bottlenecks. Further lowering of policy hurdles, up to the level of urban local bodies will pave the way for further growth.

While there are no quick fixes, we are positive that we will see a rise in housing demand in 2019.

Ramesh Nair is CEO and Country Head in India at JLL.

First Published:Feb 2, 2019 7:10 AM IST