Budget 2019-20: Much-needed Stimulus for Affordable Housing

Manish Sheth

(Manish Sheth is MD & CEO, JM Financial Home Loans Ltd. The views expressed are personal)

Invoking the teachings of Lord Basaveshwara, a 12th-century social reformer who advocated the idea of the welfare state or Kalyana Rajya, the Budget with a series of demand-stimulating proposals reiterated the governments thrust upon ‘Housing for All Mission’.

On one hand, proposals related to ‘Housing for All’ such as tax breaks for purchasing affordable homes and increasing eligible carpet area for affordable housing unit will benefit the affordable housing sector.

On the other, the governments key focus areas such as Make in India and aspiration to become a $ 5-trillion economy will also drive long-term housing demand through job creation.

Come to think of it, a small family consisting of two earning members and running a small enterprise making Rs 1 lakh per month do not fall under the Income Tax and the Goods and Services Tax (GST).

That, to my mind, is ‘Ease of Doing Business’. That’s why the common people in India are cheering for the Budget.

Two key initiatives announced during the Budget on ‘Housing for All’ are: a) Additional deduction of Rs 1.5 lakh on interest paid:

The government introduced 80EEA scheme for interest tax benefit on home loans. Home buyers are now allowed additional deduction of Rs 1.5 lakh from taxable income (above the existing deduction of Rs 2 lakh) for interest paid towards housing loan. The scheme is applicable for the first time home buyers on a property value of up to Rs 45 lakh. The proposal could lower the tax burden of homebuyers by 3-10 per cent every year.

While these measures will directly benefit the affordable housing sector, there are a slew of other initiatives announced in the Budget which should indirectly benefit the housing demand over medium- to long-term.

For example, incentivising Make in India through tweaks in custom duty (reduced duty on inputs and raw materials of value-added products/higher duty on imported final products) should support manufacturing of those materials in India.

Similarly, setting up of mega-manufacturing plants in sunrise industries through competitive bidding, incentives for manufacturing of electric vehicles should boost domestic manufacturing sector as well.

Various incentives for the start-ups are also aimed at creating jobs in the country. These initiatives, if successfully implemented, will create jobs mostly in the non-metro cities which should push housing demand in general and affordable housing segments in particular.

Expanding the gamut of companies falling under the 25 per cent tax bracket will also give a boost to SMEs which are the biggest job creators in the country.

The Budget proposal to increase the annual turnover to up to Rs 400 crore (from Rs 250 crore) for lower corporate tax of 25 per cent will now take into account 99.3 per cent of all the companies in the country. (IANS)