Effect of Budget on Real Estate


Posted on 11th February 2019 Author: Planet Homes



Every Indian had been waiting eagerly for the 2019 Budget as it had been a great year of turmoil, much disruption for the financial markets. The budget had some direct and indirect effect of many things.

We have been witness to large impacts on the real estate market in the past few years with it almost hitting rock bottom. The real estate marketers have keenly glued to the budget this year and well fortune has favored them.

Here are some highlighting effects of how the 2019 financial budget will impact real estate and its peripheries.

1.    Extension of Section 80-IB benefits

The 2019 Budget dictated the extension of Section 80-IB benefits to another year. That will help in aiding the government's housing for all program and will give a good push for the affordable segment.

Section 80-IB benefits have gained control to revive the ailing housing sector. Many developers who were in the planning phase of 80-IB compliant projects will now be benefitted with a breather in terms of receiving approvals for such projects. Increase in the inventory of 80-IB compliant units will benefit more and more end-users. This benefit is a welcome move for the developers as well as the end-users.

2.    Tax on notional rental income from unsold inventory

Earlier the unsold inventory was taxed per notional rent income after one year of completion. But this, in particular, was a double whammy effect for the struggling real estate sector. In a slow market, it was anyway hard to move on to the inventory and to add on to that there was the burden of tax incidence on notional rental income within one year from completion.

The government has given the benefit of this to the developer. Unsold inventory will be taxed as per notional rental income only post two years of completion. This will give a breather to real estate developers sitting on unsold inventory sufficing the bad times.

3.    Tax on notional rent Income from second house property

Until the financial year 2019, notional rental from second house property that was not leased was taxed. This created a huge drain on the cash flow of investors.

The real estate market is slow and yield from residential properties is at an all-time low. In such a scenario it was unfair to tax notional rental on non-leased house property. The government has revised this rule and for the financial year 2020, second house property that is not leased will not be taxed.     

4.    Capital gains benefit

Long-term capital gains from the sale of a house can now be invested for purchasing two properties instead of the earlier mandated single property. This will enable home buyers to take a decision pertaining to purchasing property faster. This will also residential sector growth. Large residential properties with historic values made it very difficult for owners to sell and create multiple assets. With this new law, owners will now be able to invest in two residential assets and reduce the burden of capital gains.


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