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Slew of favourable policies for the real estate industry

Two successive good news first of a favorable Union Budget followed by a probable softening in home rates, are enthusing Goan realty developers.

The RBI Monetary Policy Committee on February 7, cut the repo rate by 25 bps to 6.25 percent. The repo rate is expected to lower the loan rates for home buyers and reduce the cost of funds to builders.

According to industry players, the rate cut augurs well for their sector. It is expected to increase demand for home loans and provide the much needed impetus to revive the housing sector. Builders said that, they are eagerly waiting for banks to announce lower lending rates.

The RBI repo rate cut is close on the heels of a favorable Union Budget 2019-20. The Budget has ensured better liquidity and lower tax burdens on the purchase of homes. It is expected to boost housing sales in both the primary and the secondary market.

For making more homes available under affordable housing, the benefits under Section 80-1 BA of the Income Tax Act is being extended for one more year, i.e. to the housing projects approved till 31st March, 2020.

The benefit under section 80-1 BA means all housing projects registered under the Real Estate Regulatory Act by March 31, 2020 would come under its ambit.

The Budget also proposed extending the exemption period for levy of tax on notional rent, on unsold inventories, from one year to two years. The exemption will be from the end of the year in which the project is completed

Further the finance minister announced the rollover of capital gains under section 54 of the Income Tax Act from investment in one residential house to two residential house with a upper limit of capital gains up to Rs two crore. The benefit can be availed once in a life time.

Another announcement relates to an increase in the TDS threshold for deduction of tax on rent from Rs 1,80,000 to Rs 2,40,000. This measure is expected to provide relief to small taxpayers

The Budget also revealed that, during 2014-18, 1.53 lakh houses have been constructed under the Pradhan Mantri Awas Yojana. The real estate industry is facing a slowdown due to the weak residential segment. The slowdown is showing no signs of recovery this year with demand yet to revive. Further with NBFCs in crisis, there is a liquidity crunch faced by companies.

With key reforms of RERA and GST in place and the disruptive impact of demonetisation fizzling out, realty players hope that their sector is set for better times. Builders expect the sector to face rough weather in the first half of 2019.

“Stalled housing projects continue to be stumbling blocks in the growth of the sector, especially with buyers staying away from risky under-construction projects,” said an Mumbai based builder.

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