Budget 2020 to give fillip to housing demand

The rollover of capital gains tax on the sale of houses, which has been increased from one to two houses in Budget 2019, is expected to push up the demand for homes.

The move, coupled with a proposed rebate on taxable income up to Rs 5 lakh, is expected to give a boost to affordable housing, according to analysts. “This (rollover of capital gains) is a good move to incentivise genuine homebuyers and investors to buy new properties,” said Anuj Puri, Chairman of real estate advisory firm Anarock.

Interim Finance Minister Piyush Goyal, in his first ever Budget, announced a slew of measures aimed at wooing the middle-class electorate in the build-up to the Lok Sabha elections 2019.

“The benefit of the rollover of capital gains under Section 54 of the Income Tax Act will be increased from investment in one residential house to two residential houses for a taxpayer having capital gains up to Rs 2 crore. This benefit can be availed once in a lifetime,” Goyal said in his budget speech.

Currently, if you sell a property after three years, the profit is treated as long-term capital gains and taxed at 20% after indexation.

Though the Budget didn’t have many things to cheer about for the real estate sector, the real estate companies across the spectrum believe that the full rebate proposed up to the taxable income of Rs 5 lakh will push up the demand for affordable homes on the back of an expected increase in consumption. “The proposed rebate can have good implications for affordable housing, but not really on mid-income housing,” Puri said.

The rebate translates into a fiscal stimulus amounting to Rs 24,000 crore (0.1% of GDP). According to Tanvee Gupta Jain, Lead India Economist at a global wealth manager, it is expected to boost consumption.

The country, especially Bengaluru, has recently seen a steep rise in affordable housing. The city saw a whopping 91% increase in supply during 2018 along with far higher demand.

The city witnessed 34,880 new launches during the year gone by, which is almost double the 18,290 housing units that were rolled out in the city during 2017, according to data from real estate advisory Anarock.

The boost in real estate supply came from affordable housing as sub-Rs 80 lakh homes constituted 80% of the supply of new homes in Bengaluru. The sub-Rs 80 lakh homes accounted for 28,250 of the new houses supplied in the Bengaluru market.