Budget Review by Khushru Jijina Managing Director Piramal Capital & Housing Finance
The Interim Budget for FY20 aims at a fine balance between the upliftment of the rural economy as well as incentivizing the high spending urban middle class. The budgetary provisions for India’s rising middle class is expected to stimulate demand and help attain the targeted economic growth. Budgetary outlays aimed at the real estate sector are encouraging for the sector. Benefits like rolling over capital gains tax to two homes and exempting income taxes on imputed rent for the second occupied home would stir up home demand especially in the affordable segment.
Additionally, the real estate developers would be benefited by the extension of the exemption period for levying tax on unsold inventories at a time when the sector is undergoing liquidity stress. Also, we expect a favorable decision from the GST council overseeing ways of normalizing the tax’s impact on developers as well as end consumers. Also, the Finance Minister’s reiteration that renewable energy is one of the tenets of economic growth till 2030 would bode well for the industry including solar and wind energy. The Government’s commitment towards managing the fiscal deficit as well as its debt is noteworthy. Despite the relaxations in direct taxes, the budget expects tax revenues to grow by 13.5% in FY20 compared to FY19 with Government’s borrowing growing marginally by 10% compared to the last year. We expect both equity and debt markets to react positively to Government’s commitment towards the fiscal glide path with bond yields on a downward trend this year.
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