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The impact of Budget 2020 on the real estate sector

The impact of Budget 2020 on the real estate sector

The Budget 2020 has come up with a number of surprises for the real estate sector, as well as the common man. While there were several demands that the industry was expecting to be addressed in the budget 2020, only a few got considered by the Finance Minister.

The Government, in its Budget 2020, announced measures to boost the affordable housing segment. While the reforms elated the buyers and developers in this segment, other segments remained left-out. However, the Government laid emphasis on liquidity issues of the developers across all segments. The benefits of tax announced by the Finance Minister are expected to urge more individuals to purchase homes.

Boost to affordable housing

The Government, in the Union Budget 2020-21, concentrated more on providing a thrust to the affordable housing sector. The Minister announced an extension in the permitted additional deduction of Rs 1.5 lakhs, for interest paid on loans borrowed for the purchase of an affordable house, which is valued up to Rs 45 lakhs. The period has been extended by one year, i.e. up to March 31, 2021. Hence, the total tax deduction on such interest paid remains at Rs 3.5 lakhs for one more year, which is expected to impact the demand in the affordable housing segment positively.

The Government intends to achieve the target of Housing for All by 2022, through the Pradhan Mantri Awas Yojana (PMAY). It has sanctioned over 81 lakh houses under the PMAY-Urban scheme, and an additional 1.95 crore houses have been proposed to be provided under PMAY-Rural. The Government has continually been making efforts towards boosting affordable housing in the form of granting infrastructure status to this segment in the previous budget. This is a big move, as it will benefit a broader segment of the homebuyers and increase the demand in the sector. Moreover, owing to the help provided by the Credit-Linked Subsidy Scheme (CLSS), families are currently ready to shell out little extra to buy a home that better matches their needs. In the latest budget, CLSS allocation for urban areas has been decreased by nearly 50 percent as compared to FY19. The plan stays clear, and any alteration in the allotment is probably not going to hamper the qualified cases. While more than 80 lakh homes have been sanctioned for the Economically-Weaker Section of the society in the urban zones, nearly 25 lakh have been delivered since June 2015. The Government, however, believes that it can deliver the Housing for All promise ahead of time.

The Budget has likewise spread out a guide to mitigate the liquidity imperatives in the Non-Banking Finance Sector (NBFC) through re-capitalisation of Public Sector Banks (PSBs) and the arrangement of a halfway assurance to PSBs for purchasing high appraised pooled resources from NBFCs. Moreover, the RBI will supplant the National Housing Bank (NHB) to regulate Housing Finance Companies (HFCs). These elements (NBFCs, HFC’s and PSBs) are the head providers of development funds to designers and home loan money to purchasers.

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