Budget 2019 - Government Thrust To Drive Affordable Housing Segment

The real estate sector has witnessed a sign of recovery in recent times. The newly formed Finance and Corporate Affairs Minister Smt. Nirmala Sitharaman presented the Budget 2019-2020 in the Parliament on 5th, July 2019 to encourage the growth of the housing segment through various measures.

Focusing on the goal "Housing for All 2022", Nirmala Sitharaman has announced significant tax benefits which will boost the real estate industry.

EXTENDED BENEFIT
To make housing more affordable for all sections of society, the Government of India started Pradhan Mantri Awas Yojana (PMAY). An initiative to provide affordable housing to the urban poor with a target of building 20 million affordable houses. Recently, the government has announced that the GST rate applicable on home loans will be reduced from 8% - 12% for those who apply for the loan under the Pradhan Mantri Awas Yojana schemes.

INTEREST DEDUCTION FOR THE FIRST TIME HOME BUYERS
First-time homebuyers can claim deduction under section 80EE for interest paid on a home loan up to a maximum Rs 50,000 until the loan is fully repaid. This tax benefit is expected to boost demand substantively. It will significantly benefit first-time homebuyers to enjoy the benefits of interest subvention under the CLSS scheme.

CREDIT GUARANTEE TO PSBS TO BUY NBFC ASSETS
Non-banking financial companies (NBFCs) play a vital role in capital formation. To provide one-time partial credit guarantee worth Rs 1 lakh crore to public sector banks for the purchase of pooled assets of financially sound Non-Banking Finance Companies (NBFCs) during 2019-20.

INCREASE IN DEDUCTION OF INTEREST ON HOME LOANS
Interest paid on housing loans is allowed as a deduction to the extent of Rupees 2 lakh in respect of the self-occupied property. To provide a further impetus, an additional deduction of up to Rs 1.50 lakhs on interest paid on loans borrowed up to March 31, 2020, for purchase of an affordable house valued up to Rs 45 lakh. Therefore, a person purchasing an affordable home will now get an enhanced interest deduction up to Rs 3.5 lakh.

TRANSFORMING RURAL INDIA
By 2022, a total of 1.54 crore rural homes would be completed. In the second phase of PMAY, 1.95 crore houses are proposed to offer to the eligible beneficiaries. These houses will offer amenities such as toilets, electricity and LPG connections.

CHANGING URBAN INDIA
Under Pradhan Mantri Awas Yojana (PMAY-Urban), over 81 lakh houses with an investment of about Rs 4.83 lakh crores sanctioned of which 47 lakh houses were under construction. 26 lakh houses have already been completed so far, and 24 lakh houses allotted to the beneficiaries.

BENEFIT FROM THE EXEMPTION OF TAX ON NOTIONAL RENT
Earlier, people would hesitate to invest in the property for rental income as they were charged tax on the notional rental income on the second house property. However, with the exemption of notional rent, this hurdle is removed from the way of investors.

This budget will further push and spread the affordable housing segment in India.