The real estate sector which has gone through the sluggish sales in last couple of years has got some good reasons to cheer now. Increase in deduction on home loan interest, tax pass-through status for REITs, proposal for 100 more cities, proposal for ‘home for all’ programme, easing of FDI norms in real estate – truly real estate sector has got the much needed impetus from the budget. The industry can look forward to ‘Achche din’!
Here are the few points worth noting for the common man and the realty sector:
- Basic exemption: The basic tax exemption limit has been raised from ₹2 lakhs to ₹2.5 lakhs; and for senior citizens (above 70 years of age) it is raised to ₹3 lakhs. So even a senior citizen in 30% tax bracket can save ₹5,150 in taxes.
- Exemption u/s 80C: The tax exemption u/s 80C has been raised from ₹1 lakh to ₹1.5 lakhs. This will result in savings of ₹5,150 (for those who are in 10% tax bracket), ₹10,300 (for those who are in 20% tax bracket) and ₹15,450 (for those who are in 30% tax bracket). Repayment of principal part of EMI on home loan, PPF, EPF, contribution to life insurance premium and fixed deposits having five years maturity are the few financial heads which enjoy exemption under this head.
- Exemption u/s 24: The tax exemption limit u/s 24 for interest on home loan for self occupied home is raised from ₹1.5 lakhs to ₹2 lakhs.
- Investment in PPF: The investment limit in Public Provident Fund has been raised to ₹1.5 lakhs. It will benefit the conservative investors who opt for risk free investment to build a bigger corpus for their later years.
- Relaxation in FDI: Liberal norms for FDI and tax incentives for REITs (Real Estate Investment Trusts) are the two additional sops realty sector has got from this budget. The budget proposed to allow foreign direct investment (FDI) in projects of 20,000 sqm (earlier it was 50,000 sqm) and raising the upper limit on FDI from $5 million to $10 million with a three-year lock-in period after completion. It is expected to attract finance from foreign sources and therefore results in more flow of cheaper funds to this sector.
The new government’s proposal for 100 smart cities as satellite towns of larger cities, focus on low cost affordable housing, urge to deliver the promise of ‘housing for all by 2022’ – are few more reasons to be optimistic about the revival of reality sector. Hope these changes will also give some reason to smile for the common man who is already suffering from the onslaught of rising inflation.