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How does the Budget 2020 affect the construction and real estate industry?

"Architect Santosh Wadekar writes about the Indian 2020-21 Budget from the perspective of the construction, real estate and the design industry"

The Indian Finance Minister delivered her second budget today to mixed reviews in the construction industry. Here are the hits and misses and its impact on the construction industry at large and subsequently the real estate and the design community

The Hits:

Predictably the Budget is in line with the "Sabka Vikaas" lines that was the hallmark of the maiden 2019 budget of NDA II.


Massive funding already allotted to infrastructure development in the first budget is further stepped up. An accelerated development of highways will be undertaken since the NHAI has been lagging in commissioning roadworks till date . Also, monetization of 12 lots of highway bundles spread over 6,000 km will take place before the year 2024,

100 more airports will be added under Modi government’s UDAN scheme and the aircraft fleet to be doubled. Moreover, electrification of Indian railways will be done and more trains like "Tejas" will be introduced connecting major Cities across India.A National Infrastructure Pipeline has already been launched on December 31, 2019 of Rs 103 lakh crore.

Affordable housing: Continuing the last budgets focus on affordable housing, tax benefit on affordable housing loans would be extended by a year to loans sanctioned till March 2021. This would push more first-time home buyers to enter the market.

Additionally, the date of approval of tax holiday provided to developers of affordable housing would also be extended by a year. This would encourage more and more developers to transition into affordable housing as the luxury segment is already reeling due to overexposure and under consumption.

Concession on real estate transactions: At the moment, while taxing income from capital gains, business profits and other sources in respect of transactions in real estate, if the consideration value is less than circle rate by more than 5 percent, the difference is counted as income both in the hands of the purchaser and seller. In order to minimize hardship in real estate transaction and provide relief to the sector, FM proposed to increase the limit of 5% to 10%.

This move might trigger investors to re-enter the market which is suffering due to cash crunches  

Personal Income Tax and simplification of taxation:

In order to provide significant relief to the individual taxpayers and to simplify the Income-tax law, It was proposed to bring a new and simplified personal income tax regime wherein income tax rates will be significantly reduced for the individual taxpayers who forgo certain deductions and exemptions.

This will leave significant money in the hands of the tax payer, thus increasing mass consumption and spending.

The Misses:

Though the large scale picture is predictable with the promises of the Government, the microscopic fine print on many of the policies is still wanting. There have been no industry specific policies for any industry, let alone the real estate and construction, that will buoy up the sagging market morale.

Industry status

The demand of the real estate industry for an industry status still continues to elude the industry as a whole. Had real estate earned the ‘industry’ status, builders would have been able to apply for loans at a lower interest rate, cutting the cost of construction of projects and boosting housing sales across the country

Affordable home upper limit:

It was hoped that the upper limit of an affordable home especially in prime metro cities would be increased. This would have helped the severe housing crisis for the lower economic strata of city dwellers, who are currently facing accommodation crisis in prime cities Unfortunately this has not happened, thus leaving out a large chunk of city dwellers out of preview of the benefits of an affordable home

No single-window clearance mechanism: Gaining approvals for real estate projects was expected to get easier with the introduction of the single window clearance system, but the Budget failed to address this issue. This would have helped speed up the excessive delays in the projects due to multiple agency clearances

Loan Restructure:

The industry demand of a one-time restructuring of housing loans with a moratorium on principal and interest of two years was left out of the budget.

In conclusion, healthcare, public transport, road and waterways, power generation all get a much required boost. Increased government spending in these areas will thus help generate jobs. Money in the hands of tax payers will hopefully revive consumption and drive the economy. The construction industry has now a great new opportunity to explore their skills in infrastructural developments, Taking India ahead with state of the art transport systems. Infrastructure development will help create more cluster developments along the way,

However the real estate and real estate construction segments have nothing to gain in this current budget. The Crisis created due to the policy restructure of 2016 (RERA, GST and NBFC's) has still not eased from this segment and it does not look like it will in the near future to come.

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