Planning to buy a house? Here is a quick guide on the benefits you can get!

The Union Budget 2019 saw the lion’s share going to infrastructure and allied development. However, it also provided a much-appreciated boost to rental and affordable housing, with the prior being addressed formally in the Parliamentary house for the first time. The Indian rental housing market is a highly unorganized one and is valued at around $20 Billion by the IMF. The announcements made in the Budget affected mainly these stakeholders in the real estate and housing space - home-owners, buyers, builders and developers, people paying rent and bankers.

In the recent years, the general sentiment and ambition of owning one’s own house had been dampened by the rising costs of urban housing in the metros.  However, with the mission “House for All by 2022” fueling the ambitions of owning a house, there is a large chunk of our population which can now consider taking the plunge and owning a house for themselves. Among these benefits were higher tax incentives and new-age laws to enter the buying sector and avail home loans to fulfil their dream of living in their own houses.

Introducing New Model Tenancy Law

The government has also put forward a New Model Tenancy Law to boost the fragmented rental housing market in India. This is being done since the existing tenancy laws fail to realistically outline the relationship between the lessor and the lessee. The existing laws have reached obsolescence. The Finance Minister has said that the new laws will be finalized and circulated soon.

Affordable Housing on Cards

The Union Budget has enhanced the prospects for builders and developers too. The demand for affordable housing is expected to go up soon and thus the builders and developers welcome the interest deduction up to Rs. 3.5 lakh for affordable housing priced below Rs. 45 lakh in contrast to the earlier prevalent 2 lakh rupees on house loans availed before March 31, 2020. The home buyer’s liquidity will swell owing to the larger saving on tax. According to Budget 2019 announcements, the additional deduction of Rs. 1.5 lakh will be available under these circumstances:

• The loan is sanctioned by the financial institution during the period April 2019 to March 31, 2020

• The stamp duty value of the new house does not exceed Rs. 45 lakh.

• The new house property should be covered in the 'affordable housing' category.

• The buyer does not own any residential house property on the date of sanctioning of the loan.

In a move to benefit the landlords, the Budget has proposed an increased the limit for tax deducted at source (TDS) on rent paid to them by non-individuals, such as corporates, etc. Earlier, non-individuals who rented out houses had to deduct TDS if rent paid was more than Rs. 1,80,000 in a financial year. This limit has been raised to Rs. 2,40,000 per annum. This translates to a direct relief to those who depend on rental income

Change of guard for housing sector

In India there are three types of lenders, Non Banking Financial Companies (NBFCs), Banks and National Housing Banks (NHBs). The Banks and NBFCs are already regulated by the RBI and the budget proposes to shift the regulatory authority over housing finance to the RBI as well. This would lead to an improvement in the supervision of the housing finance companies. It can also be expected to address and eradicate the existing liquidity crunch.

The Stock Market Impact

After the announcements, the sentiments of the real estate and housing sectors were positive and can still be said to be positive. This is supported by the performance of the Nifty realty. Nifty realty has outperformed the market and has since generated around 18% returns as on July 26, 2019. Nifty realty is also expected to outperform the market in future too.

We have rounded up the top gainers in the sector, they are, Godrej Properties Ltd., which has gained an impressive 45.20%, Brigade Enterprises Ltd., which has appreciated about 24.8%, Indiabulls Real Estate ltd., which has seen growth of around 20.58%, Oberoi Realty Ltd., which has appreciated 24.99% and Prestige Estate Projects Ltd., which has grown about 19.81% to name a few.

These companies have a few factors which have worked out for them, they are, lower interest rates, higher purchasing power parity and sustained demand in metro cities, specially Pune and Bangalore. Along the same lines, enhanced tax benefit for consumers have also contributed to it.

Conclusion

The real estate and housing sector have promising prospects right now as well as in the coming months. The demand for affordable housing is on the rise. With the government providing relief to home buyers, the prospects of the sector are good.

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