V Nagarajan

The Union Budget for 2019-20 is a progressive budget in many areas but the housing sector should have been focused much more to provide a comprehensive solution to the ailing sector.  

In a nutshell, the affordable housing sector, as anticipated, has been given a big boost with the fiscal sops. There will be an additional deduction of Rs1.5 lakh towards interest paid on housing loan borrowed for loans availed between April 1, 2019 and March 31, 2020 for investment in affordable housing upto the unit value of Rs4.5 million. This would give the much needed relief to the developers of affordable housing projects as well homebuyers.    

The announcement of re-introduction of a model tenancy code is targeted to release the unutilised housing stock and this may augur well to ease the housing shortage in areas where it is needed most.

Land is always a critical area where much has been talked about but little has been done so far. The NDA government aims to identify and release unutilised lands owned by the central public sector enterprises and ministries through concessional agreements and joint developments may lead to augmentation and creation of public infrastructure and affordable housing. The easing of sourcing norms for single brand retailers is a welcome move.

Infrastructure is key to overall development of the economy.  Investment target of Rs100 lakh crore in the infrastructure sector over next five years will augment logistics capacity for higher internal trade carried out through inland water transport system and creation of multi-modal inland cargo terminals.  

The oft-repeated SPV model for faster development of railway infrastructure through development of regional rapid transit system and enhancement of metro rail network through PPP, will improve the connectivity levels and ease city congestion. In fact the total road sector outlay for FY20 is Rs.1.58 lakh crore, up 12%, which will supplement the exercise.

On the regulatory front, the move to enhance the powers of RBI over NBFC would improve the overall credibility of the sector.  This will also improve transparency in the system.

With a thrust on intensifying the FDI inflow, the budget has allowed foreign portfolio investors (FPIs) to subscribe to listed debt papers of REITs and InviTs.

Q:I bought an apartment in Pune in 2008 for Rs7.5 million and in the process of selling it for Rs20 million. What will be my tax liability in the event of sale of the unit? Please clarify. Deshmukh, Sharjah.

A: As the property has been held for more than two years, you are entitled to index the cost of acquisition and the cost of any improvements to the asset made over the years.  Indexation is done by multiplying the cost of the property by the cost inflation index (CII) of the year in which it is sold and dividing it by the CII of the year in which it was purchased. In order to arrive at the capital gain, you need to reduce the indexed cost of acquisition from the selling price of the apartment.  The rate of capital gain is 20.8%. You can avoid capital gains by investing the sale amount in a new house or buying capital gain bonds of REC/NHAI.   

Q: I have rented my apartment in Bengaluru to another NRI for six months who is on project work there. The rent will be deposited in my NRO account.  What will be tax liability? Dayananda, Dubai.

A: Income from the apartment in Bengaluru will be taxed in India in your hands.  While filing your yearly income-tax return, you will have to report this income.  You are entitled to deduct municipal taxes paid in India and claim 30% standard deduction from the rental income accrued to you. The lessee will deduct tax at source (TDS) if the monthly rental exceeds Rs 50,000. You can claim it from the total tax payable at the time of filing your income tax return (ITR).

Q: A developer has offered apartments with firm lease commitment and assured rental income in India. How safe is it to invest in such properties and whether home loan will be made available for investing in such units? Santhosh, Dubai.

A: Due to spurt in office space absorption by corporates and MNCs across major Indian cities, there has been a surge in demand for rental housing and even corporates are looking for accommodation to control the attrition level in their entities.  Even the new budget emphasized that rent control laws will be revamped to promote rental housing. The developer may have got a mandate from the corporates to ensure availability of apartments in his project for rental accommodation.

It is safe to invest in such units as you will get return from day one and housing finance companies and banks will also offer home loans to invest in such units. However, you will have to look at the lease period, escalation clause in the rent at periodical intervals and other factors to ensure that your interest is protected while leasing the premises.