Indian budget set to sustain momentum in realty sector

V Nagarajan

While presenting the union budget 2024-2025 in the Parliament, Finance Minister Nirmala Sitaraman stressed the need for people to work in order to build Viksit Bharat by the year 2047. On the realty sector front, as anticipated, the government has continued its task of developing additional 3 crore houses under PM Awas Yojana in rural and urban areas.  This is expected to promote affordable housing  for middle-class and EWS.  Moreover, the interest subsidy will enable providing affordable home loans for urban housing projects.  The policy on rental housing will boost transparency in housing market.

A significant development is the initiative taken by the federal government to encourage states to moderate stamp duty rates which will have a positive impact on housing demand.

The proposed development of 12 industrial parks under National Corridor Development Programme with complete infrastructure in or near 100 cities will strengthen the overall industrial ecosystem.  Moreover, these initiatives will influence Tier-II & III cities, facilitate the development of multi-modal logistics hubs, stimulate private sector investments, and result in the development of industrial and warehousing sectors in Tier-II & III cities, according to Savill survey.

Rental housing: The dormitory type accommodation for industrial workers will be facilitated in PPP mode with viability gap funding support and commitment from anchor industries. This will enable purpose-built housing and enhance the availability of housing for this segment.

In a significant development, the government has mooted the long pending drive to bring transparency in land transactions.  Measures for rural and urban land parcels, such as the assignment of Unique Land Parcel Identification Number (ULPIN), and digitisation of land records with GIS mapping among others, will enhance transparency and reduce fraudulent transactions.

Clear identification of land will contribute to the appreciation of land prices and enhance development opportunities. Streamlining the database will allow for better land use planning and zoning, increasing the marketability of land parcels and make it easier to close land-related transactions, said Savills survey.

On the flip side, a major development in the budget is the doing away with indexation benefit for immovable property.  The long-term capital gain for land and building and other assets has been reduced from 20% to 12.5%.  With rationalisation of rate to 12.5%, indexation available under second proviso to Sec.48 is proposed to be removed for calculation of any long-term capital gains, which is presently available for property, gold and other unlisted assets.  This will ease computation of capital gains for the tax payer and the tax administration.  The new capital gains tax is applicable to both old and new regime.

Under section 194H, payment of commission or brokerage, the TDS rate has been reduced from 5% to 2% with effect from October 1, 2024.

A number of measures announced in the union budget will go a long way in improving the infrastructure on multiple fronts.  The road infrastructure outlay of Rs 26,000 crore will boost connectivity.  Construction of these highways and bridges will enhance connectivity between major urban and rural areas leading to creation of new urban clusters and consequent real estate development.

Restoring the cultural heritage across Bihar especially and Orissa will stimulate investments in infrastructure and unlock real estate development opportunities especially in retail and hospitality sectors. The union government will facilitate development of Cities as growth hubs. “This will be achieved through economic and transit planning, and orderly development of peri-urban areas utilising town planning schemes.   The transit-oriented development plans for 14 large cities with a population above 30 lakh. This allows cities to develop people centric neighbourhoods with easy access to public transport and economic opportunities resulting in urban development and employment generation,” says Savills survey.

I have entered into a JV with a developer and the construction is partially completed but completion certificate has been issued for part of the project.  What is the implication on capital gain tax?  Mehul Jawkar, Sharjah.

Generally, capital gain shall be chargeable to tax in the year in which certificate of completion for the whole or part of the project is issued by the competent authority.  In your case, capital gain proportionate to the land involved in the part of the project for which certificate of completion has been issued shall be chargeable to tax in the year in which such certificate has been issued by the competent authority.

I have recently acquired Canadian citizenship.  As a resident I had invested in agricultural land and farmhouse Delhi.  Can I continue to hold these assets? Ajit Jain, Dubai.

You can continue to hold these assets acquired as a resident in India.  Under the FEMA Act, 1999, a PIO who had acquired immovable property in India while he was a person resident in India may continue to hold such property.  Under the general permission available, you may transfer by way of sale or gift agricultural land/farmhouse in India to a person resident in India who is a citizen of India or to an NRI/PIO.  The sale proceeds may be credited to NRO account.