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Impact of Budget 2019 on real estate sector

Ramesh Agrawal , Last updated: 25 July 2019  
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The Union Budget 2019 was presented on 5th July in the Lok Sabha by the First Female Finance Minister Mrs. Nirmala Sitharaman. 

Highlights of the Budget 2019 for  Real Estate Sector:

1.  Additional tax benefit of Rs 1.5 lakhs to home buyers

The government has increased the benefit of tax deduction against interest on home loans for affordable housing, with a value of up to Rs 45 lakhs. Now Interest deduction will be upto Rs 3.5 lakhs for affordable housing, as against Rs 2 lakhs earlier.

2.  Boost to Infrastructure Development

The government has said that it is committed to boosting infrastructure across the country. The FM spoke about improving road; suburban railways and Metro connectivity and waterways; investing Rs 100 lakh crores in infrastructure over the next 5 years.

3. Housing for All by 2022

Focusing on affordable housing to achieve ‘Housing for All by 2022’, the Finance Minister while quoting “Gaon, Garib, and Kisan at the center” presented the aim of the government to achieve its target of ‘Housing for All by 2022’, through the Pradhan Mantri Awas Yojana (PMAY). The government 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 the PMAY-Rural.

The Finance Minister also mentioned that under PMAY, the time for completion of houses was reduced from 314 days in 2015-2016 to 114 days in 2017-18, enabling the scale of achievement in PMAY providing all basic amenities such as LPG, electricity, and toilets. 

4. Increase in Carpet Area for affordable housing 

To form a balance between the concept of affordable housing in the Income-tax Act and the GST Act, the limit of carpet area is proposed to be increased from 30 square meters to 60 square meters in metropolitan regions and from 60 square meters to 90 square meters in non-metropolitan regions.

5.  Regulation of the Housing Finance Sector

In order to add stability to the Indian housing industry, it was announced that the Reserve Bank of India (RBI) will now be the in-charge of the regulation of Housing Finance Companies (HFC). This sector was previously managed by the National Housing Bank (NHB), but, for the efficient regulation of the housing sector, quality assessment and to infuse fear of scrutiny amidst banks if found indulging in improper practices, the RBI shall now take the charge.

6.  Reformation of Rental Laws

The finance minister proposed the Model Tenancy Law, to replace the current rental law. The aim is to boost rental housing and increase the interest of investors, who are looking for rental income. Therefore, the draft tenancy model will be introduced and circulated across the states soon. As per the reports generated by the International Monetary Fund (IMF), the implementation of the model would considerably benefit the Indian rental market worth $20 billion.

7. Tax holiday to developers of affordable housing

The FM announced a tax holiday on profits earned by developers of affordable housing in pursuance of realization of the goal of ‘Housing for All’ and affordable housing.


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