Finance Minister Nirmala Sitharaman presented the second budget proposal of her tenure and the first for the new decade. Introduced amidst an increasingly slowing economy, Budget 2020 had a lot weighing on it. Economic experts had gone record, stating that this budget needed to bring forth revolutionary proposals, that would boost India's financial health - directly addressing the cash crunch that has gripped the economy.

The real estate sector too had pushed forth a list of pressing concerns, however, only a few were addressed by the Finance Minister, this morning. However, things took a turn for the better for individual tax-payers. The cabinet's focus remains on affordable housing, and the Finance Minister's proposals reflect that.

Let's take a look at how the Union Budget 2020 will affect the housing sector and the individual home buyer.

AFFORDABLE HOUSING

1. Continuing their consistent efforts into realizing the Prime Minister's 'Housing For All' dream, the Finance Minister had announced an additional deduction of up to Rs. 1.50 Lakhs applicable on the interest paid on loans taken for the purchase of a house valued up to Rs. 45 Lakhs, that fall under the affordable housing segment, last year. This deduction was allowed on those home loans that have been sanctioned before, or on the 31st of March, 2020. In the union budget of 2020, the deadline has been extended by another year, in hopes of encouraging homebuyers to buy homes. The Finance Minister deems this as enough incentives to drum up sales in the affordable housing segment.

This move also benefits homebuyers, particularly first time home buyers, who will avail a significant relief on the purchase of their new home.

2. Going another step forward, in a move to boost the supply of homes in the affordable housing sector, the Finance Minister announced a tax holiday on the profits earned by developers of affordable housing projects, registered before or on the 31st of March on 2021. The cabinet hopes that the move would act as an incentive for more private developers to venture into the foray of affordable housing.

RELIEF ON REAL ESTATE TRANSACTION

In what comes as a relief to the housing sector and its investors, the Finance Minister has announced a concession of real estate transactions. Presently, while taxing income from capital gains, business 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%, the difference is counted as income, in the hands of the purchaser and the seller. In a bid to reduce the hassles in real estate transactions, the Finance Minister proposed, increasing the limit to 10%.

NEW INCOME TAX SLABS PROPOSED FOR TAXPAYERS

While the exception for paying tax under incomes of Rs 5 Lakhs stays the same, the Finance Minister has proposed several changes in the income tax slabs and reduced tax rates. The proposed tax regime is provided below.

Image credits - The Quint, 1st February 2020

Nirmala Sitharaman states that the new tax slabs and reliefs would mean a significant revenue sacrifice, however it is necessary to increase the purchasing power of the citizens. This could act as a huge positive for individuals looking to buy a home, with the new tax reforms giving them an extra berth to save money for buying a home.

However, it is to be noted that the new tax reforms are optional. Taxpayers will be given the option of availing exemptions and deductions and staying in the old regime or opting for the new one.

BIG BOOST TO INFRASTRUCTURE

The Finance Minister announced a kitty of Rs 100 Lakh Crores, that is to be invested into infrastructural development in the next five years. This would include developing more than 6500 projects across sectors such as housing, safe drinking water, access to clean and affordable energy, healthcare for all, world-class educational institutes, modern railway stations, airports, bus terminals, metro and railway transportation, logistics and warehousing, irrigation projects, etc.

Better infrastructure is directly beneficial to homebuyers and housing developers, alike as it generates more employment and the standard of living within the country.

These were all the noteworthy proposals made for the realty sector. However, many in the industry were left disappointed, after the Finance cabinet failed to propose any changes that could be made to the taxes imposed on Long Term Capital Gains, a demand that made by several experts.