In our last blog we talked about what 2019 budget has got for Real Estate Buyers. We saw how it impacted the direct consumer/buyer or existing home owner. Now, in this blog we’ll talk about what this budget has for the Real Estate Developers. As it is the real estate developers who built the infrastructure of a country. To fulfill this vision of housing for all by 2023, it’s very important to look after the real estate developers. This budget has done exactly that and has brought many amendments with respect to improving this sector.
Now lets see what changes has been made under this budget and how will they impact our developers :-
Affordable Housing Project Builders
|Under section 80(IBA) the profit derived by developers under Affordable Housing projects will be exempted from tax. Only those developers will get exemption whose projects will be sanctioned before March 2019. This date was set prior to the announcement of this budget. In the 2019 budget, the date has been extended to March 2020. Now developers whose Affordable Housing projects will get sanctioned before this new date will get exemption from tax on profit. This will encourage more developers to develop affordable housing projects which will create more supply of affordable houses. This will eventually bring the overall price for the final consumer/buyer down as it’ll affect the supply demand chain.|
Tax on Notional rent or on Assumed rent
Just like in the case of home owner owning more than one property with him living in one while other property being vacant, he’ll be liable to pay the housing tax on his vacant property on notional rent or on assumed rent. If you read our last blog then you’ll come to know more about this.
In the same way, if developer has completed his project and after one year of its completion his property hasn’t been sold or is not let out on rent yet and is vacant, then he’ll be liable to pay tax on it. He’ll not be charged any tax on his vacant property for up to one year after its completion. The tax that he’ll be paying for his vacant property will be calculated if his property still remains vacant after one year on the basis of notional rent or on assumed rent.
This was a cause of distress for real estate developers as it put them under unnecessary burden. This not only added to the cost for the developer but also made it more costlier for the home seeker/buyer as the developer will finally recover his added expense by increasing the price of his property. This was neither feasible nor it was practical for the developer and for the home seeker/buyer. To overcome this problem the time frame under which the developer was exempted from notional tax has been increased from 1 year to 2 years in this 2019 budget. This will benefit not only the developer but also the buyer as no extra cost will be added on the property by the developer.