Shubham Jain, Group Head & Senior Vice President, Corporate Ratings, ICRA says the budget is mildly positive for affordable housing and warehousing segments.
The Union Budget 2020-21 continued the Government boost on the affordable housing sector by extending the permitted additional deduction of up to ₹1.5 lakhs for interest paid on loans borrowed for the purchase of an affordable house valued up to ₹45 lakhs by one year, i.e. – up to March 31, 2021. Thus, the total tax deduction available on such interest paid stays at ₹3.5 lakhs for one more year, which is expected to positively impact demand in the affordable housing segment. Moreover, segmental supply is also expected to be favourably impacted by the one-year extension in the tax holiday currently available to developers of affordable housing.
Some positive impact is also expected on the warehousing segment, given the proposed announcement of a National Logistics Policy, availability of viability gap funding and overall focus on the creation of efficient warehousing.
For the sector as a whole, capital gains tax relief has been provided on property valuations which are up to 10 per cent below circle rates, as against the earlier provision of 5 per cent.
The development of additional smart cities and the establishment of data center parks would also increase real estate activity in the concerned pockets.
However, developer and investor community expectations on budget provisions pertaining to increased sectoral allocations and deductions remain largely unmet. Moreover, the non-applicability of the deduction on housing loans under the new optional individual tax structure can act as a significant deterrent for those contemplating availing housing loans.
