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RM Reports

Budget 2019-20 Neglects Commercial Real Estate – RealtyMyths

by Akhilesh K Prasad

Budget 2019-20 has been hailed as a blessing for home buyers and residential real estate developers. It has provided a good mix of direct and indirect incentives, especially with respect to affordable housing in keeping with the government’s flagship initiative of ‘Housing for All by 2022.’ Income tax exemption, an extension of benefits u/s 80-IBA, exemption of tax on notional rent an extension of roll-over benefits on capital gains to two properties were the salient announcements in this direction. However, the same Budget has been criticised by experts for neglecting commercial real estate market in India.

Co-working space is considered a booming segment in realty. There was no announcement to bolster this segment even in planned smart cities. While the government announced that India is the world’s second largest start-up hub, there was no announcement for the start-up ecosystem. Co-working firms were expecting that the government would eliminate the Angel Tax, which is levied on sums invested in companies by independent investors or angels. Angel funding is considered income and is therefore taxed at 30%. Thus, it does not augur well for start-up enterprises and in turn, for the co-working segment.

Contrary to expectation, there was no reduction of GST on under-construction properties and neither did the Budget establish any clarity on input-output credit. The budget also did not resolve the deadlock with regards to clearing the NBFC deadlock. These measures could have been a big boost to the industry.

The real estate sector is the second largest employer in India. It supports several ancillary units. It has strong fundamentals and is one of the biggest contributors to GDP. It has been a long-standing demand of developers that the sector should be given industry status as it will help them raise funds at lower rates in order to reduce the cost of capital and in turn the overall cost of projects. However, once again the Budget has neglected this demand.

All-in-all the Budget was seen by industry insiders as a crowd-pleasing exercise ahead of the Lok Sabha elections.

An MBA by qualification, Akhilesh has dabbled into various businesses. He is a keen    debater, data miner and analytically inclined. His blogs tend to present a fresh perspective on any given matter

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